Chavez vows exchange controls will punish strike leaders

boston.com By Associated Press, 2/5/2003 16:07

CARACAS, Venezuela (AP) Smarting from a failed strike to oust President Hugo Chavez, Venezuelan businessmen warned Wednesday that plans to restrict access to foreign currency will bury the reeling economy.

Chavez's leftist government plans to announce the restrictions on Thursday, to try to stop a devaluation of the bolivar and protect Venezuela's foreign reserves, which shrank $2 billion during the two-month strike.

Details have not been released. But Chavez vowed Tuesday to punish strike leaders by restricting their ability to purchase U.S. dollars, an essential in a nation heavily dependent on imports.

He accused those he calls ''coup plotters'' of stashing billions of dollars abroad ''our international reserves, belonging to the nation, to the Republic.''

That could force thousands of businesses to close for lack of supplies and leave tens of thousands jobless, business leaders warned.

Already, analysts say the failed two-month strike to oust Chavez will close more than 20,000 businesses and leave 200,000 people jobless.

Strike leader Carlos Fernandez, head of the Fedecamaras business federation, said Chavez was trying to impose control over the struggling private sector, which relies on imports for 60 percent of its supplies and raw materials.

Lope Mendoza, president of the Conindustria business chamber, urged citizens in the import-crazy nation to buy Venezuelan products to keep the economy afloat. ''The industrial sector isn't going to please the president, who wants to see a cemetery of businesses,'' Mendoza said.

Chavez's threat on Tuesday to provide ''not one more dollar for the coup plotters'' showed he will devise a discretionary system that will ''hand out prizes and punishments,'' said analyst Luis Vicente Leon.

''He is going to control his enemies' income. Venezuela is too dependent on imports,'' Leon said.

Chavez's government suspended dollar purchases on Jan. 22 after the bolivar lost more than 30 percent of its worth during the strike, which began Dec. 2 and ended in all sectors but oil this week.

Foreign reserves dropped $2 billion in part because the government was spending $60 million a day to prop up the bolivar.

The bolivar last traded at 1,850 to the dollar. On the black market, it's 2,500 per dollar. Devaluation, in turn, sent inflation past 30 percent, and many economists forecast a 25 percent recession this year.

Finance Minister Tobias Noriega said a fixed rate between 1,600 and 1,850 bolivars per dollar will be adopted for imports of food, medicines and government transactions.

It wasn't known how many dollars the government will make available to citizens and businesses, what conditions they must meet to buy dollars, and how many dollars they can buy.

Some newspapers speculated Wednesday that citizens will face restrictions on the amount of dollars they can buy for business travel abroad.

Also Wednesday, the government opened an investigation into a fifth private television station, Venevision, for allegedly breaching broadcast law by supporting the strike.

Chavez accuses Venevision, Globovision, Radio Caracas Television, Televen and a regional station in the southwestern state of Tachira of supporting efforts to overthrow him. The stations could be fined or suspended.

On Tuesday, the government said it would investigate whether some radio stations should have their broadcast licenses revoked for airing ''violent propaganda.''

The government is preparing a media content law governing what and when radio and TV stations can broadcast.

Media owners accuse Chavez of inciting his followers to attack journalists and abusing a law that allows presidents to interrupt private programming to broadcast speeches or government messages.