Strike May Ease as Venezuela Prepares Forex Curbs

asia.reuters.com Tue January 28, 2003 09:05 PM ET By Pascal Fletcher

CARACAS, Venezuela (Reuters) - Venezuela's opposition offered on Tuesday to ease their 8-week-old strike by exempting education and food production as the government prepared to introduce a fixed exchange rate to counter the economic impact of the shutdown.

Although oil workers were maintaining their crippling stoppage in the world's No. 5 petroleum exporter, opposition leaders were rethinking their grueling campaign to try to force President Hugo Chavez to hold early elections.

With the oil-reliant economy reeling, Chavez's government has cut budget spending and suspended currency trading to halt capital flight while it prepares to introduce foreign exchange controls next week.

Finance Minister Tobias Nobrega said late on Monday the government was considering a single fixed exchange rate.

Two days before the arrival in Caracas of a six-nation delegation which will lend its weight to peace efforts, opposition negotiators said they were prepared to halt the strike in the sensitive areas of education and food output.

"Our proposal is we should lift the strike in these two sectors as a gesture of goodwill," Timoteo Zambrano of the opposition Coordinadora Democratica group told local radio.

The government and the opposition resumed talks Tuesday on the timing of elections in negotiations chaired by Organization of American States Secretary General Cesar Gaviria. "I can't say we're close to an agreement but it's certainly been the most fruitful session we've had so far," Gaviria said.

Nobrega has extended the suspension of foreign exchange trading for another week. Government and banking sources said the currency control mechanism being discussed foresaw a single exchange rate lasting for four months, adjustable monthly, to be followed by a dual rate.

PESSIMISM OVER CONTROLS

Analysts said the currency controls might initially stem capital flight, but they would also add to the economic turmoil by pushing up prices and encouraging corruption and the creation of a black market.

This occurred in Venezuela in 1994-96. Other previous experiences in Latin America with currency controls had rarely provided lasting solutions to economic emergencies, they said.

Opposition leaders fear the government will use the measure to punish striking firms by restricting access to dollars.

In recent weeks, support for the strike has slipped and many shops, restaurants and businesses have reopened. Private banks were due to meet on Wednesday to decide on returning to normal opening hours, a government source told Reuters.

Opposition leaders are debating easing the stoppage in some non-oil areas to give hard-pressed private businessmen and consumers a breather after 58 days of a protest that has triggered an economic crisis but failed to oust Chavez.

"This strike has not failed. It will never fail," said anti-Chavez union boss Carlos Ortega. But he acknowledged that the opposition was studying "new strategies."

Chavez has said the exchange controls were necessary to counter he called an "economic coup" being attempted by rich opponents of his self-styled "revolution."

The government and private banks were discussing fixing an exchange rate somewhere between a minimum of 1,500 bolivars and a maximum of 1,850 bolivars to the U.S. dollar. The bolivar closed a week ago at 1,853 bolivars to the dollar.

Besides slashing oil exports, the shutdown has caused unprecedented shortages of gasoline and some food items. Despite complaints from parents, private schools and universities have also joined businesses in staying closed.

Chavez has refused to negotiate with strike leaders and has used troops to partially restore oil production.

Envoys from the United States, Brazil, Mexico, Chile, Spain and Portugal are due in Caracas on Thursday to support efforts by OAS chief Gaviria to broker a deal on elections.

Rejecting calls for early elections, Chavez insists his foes must wait until Aug. 19, halfway through his current term. After that date, the constitution foresees a binding referendum on his rule, which is scheduled to last until early 2007.

Opposition leaders say the nation cannot wait until August. They are collecting signatures for a constitutional amendment to trigger early elections, an option proposed by former U.S. President Jimmy Carter, who is backing the peace talks. (Additional reporting by Ana Isabel Martinez, Silene Ramirez)