Chavez says currency controls foiled plot to empty Venezuela's coffers

www.sun-sentinel.com By CHRISTOPHER TOOTHAKER Associated Press Posted February 8 2003

CARACAS, Venezuela -- Huge lines reappeared at service stations in Venezuela's capital Friday while thousands of workers continued their strike in the nation's huge oil industry.

President Hugo Chavez, who is the target of the ongoing strikes in an effort to force him from power, contends that oil production is returning to normal. The gas lines stretched for blocks, adding hours to a task that had taken 20 minutes at most earlier in the week. The drivers were waiting on pumps to be replenished. But deliveries are sporadic because of the country's 2-month-old oil strike, which has caused severe shortages and forced this oil-rich country to import gasoline.

There is no gasoline in Caracas,'' complained taxi driver Manuel Briceno, driving past one line. And Chavez and his government keep insisting things are normal.''

Thousands of oil workers have walked off the job, initially accompanied by hundreds of thousands of Chavez foes in other industries. The latter returned to work earlier this week but the protest continues at the state oil monopoly.

The government has had only limited success in keeping oil flowing. Two of the country's three major refineries remain mostly idle.

Venezuela _ the world's fifth largest oil exporter _ has spent more than $500 million importing gasoline during the strike. The government claims crude oil output is 1.9 million barrels a day. Strikers put the figure at 1.3 million. Before the strike, it was 3 million.

International oil analysts have warned Venezuela could be forced to import gasoline and export most of its crude oil production for months.

On Thursday, Chavez froze the country's exchange rate at 1,596 bolivars to the dollar for sales and 1,600 for purchases, claiming he thwarted another plot against him _ this time, a conspiracy to bleed Venezuela of its foreign reserves.

The fixed rate took effect two weeks after the bolivar's value plunged to record lows and dollar sales were suspended. Chavez blamed the strike for scaring away foreign investors.

They wanted to take it all and bring it abroad. They wanted to leave us dry,'' Chavez said. They wanted to leave us without dollars, so we took away the key.''

The opposition did not immediately respond to the claim, but several business leaders warned the new policy will fuel corruption and inflation, strangle investment and push the nation's fragile economy closer to collapse.

They also claimed Chavez will use the controls to punish strike leaders.

A commission appointed by Chavez and the Central Bank will decide who can buy dollars.

``This lends itself to any type of witch hunt,'' said Antonio Herrera, vice president of the Venezuelan American Chamber of Commerce.

The bolivar has lost 25 percent of its value this year. Inflation topped 30 percent and foreign reserves dropped by $2 billion to about $11 billion. The bolivar closed at 1,853 to the dollar on Jan. 21, the last day of trading, but sold for 2,500 on the black market.

Dollar requests could take as long as 45 days to process under the new rules. That could force many businesses to buy black market dollars at higher prices, leading to higher inflation and corruption, analysts said.

Venezuela imports 60 percent of its raw materials and most of its food.

This will force me to cut costs by laying off workers,'' said Luis Herrera, owner of a fast food restaurant. I expect sales to drop by at least 30 percent.''