Venezuela to have initial fixed forex rate-minister

www.forbes.com Reuters, 01.30.03, 9:28 AM ET

CARACAS, Venezuela (Reuters) - Venezuelan Finance Minister Tobias Nobrega, outlining planned foreign exchange controls aimed at countering the impact of an opposition strike, said the government would begin with a fixed single exchange rate that would be adjusted monthly. The government would later introduce a dual rate when production in the strike-hit oil industry recovered and political tension eased in the world's No. 5 oil exporter, Nobrega said in an interview with state television. President Hugo Chavez's government last week suspended currency trading to halt capital flight and a sharp fall in the bolivar currency caused by the opposition strike, now in its ninth week, which has slashed vital oil exports. Opposition leaders launched the protest shutdown Dec. 2 to press the leftist leader to resign and call early elections. The sharp drop in oil income caused by the strike has pushed the economy deeper into recession and triggered a fiscal crisis. "In a first stage, we would start off with a single market (rate). The idea is that it would be fixed, and fixed monthly," Nobrega said. "As ... the oil industry gradually recovers its income flows and as the political situation calms down, we would begin a system of a dual exchange rate," he said.. Nobrega also confirmed that the government planned a tax on "speculative" foreign exchange transactions, which had already been announced by Chavez at the weekend. The minister gave no details of what fixed rate would be introduced, but banking and government sources said the range under discussion was between 1,500 bolivars and 1,850 bolivars to the U.S. dollar. Battered by economic and political uncertainty, the bolivar has tumbled by 28 percent against the greenback since the strike began and the local currency closed at 1,853 bolivars to the dollar on the last currency trading day, Jan 21. The foreign exchange market is due to reopen again Feb. 5. Using troops and loyal personnel, the government has partially restored oil production. Energy Minister Rafael Ramirez said it reached 1.4 million barrels per day (bpd) Wednesday, although oil strike leaders put the figure at around 1 million bpd. Envoys from a six-nation "group of friends" formed to help solve the Venezuelan crisis were due to meet in Caracas Thursday and Friday to lend their support to negotiations between the government and opposition over elections to settle their conflict. The six nations, the United States, Brazil, Mexico, Chile, Spain and Portugal, will be backing peace efforts led by Organization of American States Secretary General Cesar Gaviria.