Foreign exchange controls herald much-needed boost to Venezuela's agriculture and domestic industry

www.vheadline.com Posted: Friday, February 07, 2003 - 7:00:41 AM By: Roy S. Carson

President Hugo Chavez Frias says he moved to stem Venezuela's foreign exchange in the nick of time and, in doing so, foiled yet another coup d'etat plan against his government by disloyal opposition rebels who failed to unseat him after a 2-month stoppage that has paralyzed Venezuela's nationalized oil industry.

The latest coup d'etat had planned to divest Venezuela of its foreign reserves through capital flight but after the Bolivar was pegged to the dollar Wednesday, its value nosedived to record lows with centrally-controlled dollar sales suspended ... a fixed exchange rate was implemented yesterday when dollar trading resumed.

Chavez Frias blames the crisis on opposition business owners who purposefully crippled the nation's economy in an attempt to scare foreign investors in a 2-month stoppage which has basically shot the perpetrators in their own foot. "They wanted to take it all abroad ... they wanted to leave us dry ... they wanted to leave us without US dollars, so we took away the key."

Opposition rebels have not warned that the President's new exchange policy will fuel corruption and inflation.  They say it will kill investment and push Venezuela's economy into collapse. They also complain that Chavez Frias will turn the control mechanism on them to target opposition leaders in the Federation of Chambers of Commerce & Industry (Fedecamaras) who led an unsuccessful coup d'etat last April which saw Chavez Frias removed from office for two days before he was reinstated by popular consent.

Venezuelan American Chamber of Commerce (VenAmCham) vice president Antonio Herrera is quoted by the Associated Press (AP) as saying that it "lends itself to any type of witch hunt."  Applications for US$ purchases could take up to 45 days to process and could force many businesses to buy black market dollars. Venezuela imports 60% of its raw materials and most of its food so market forces will necessarily now focus on domestic supply, bring a much-needed boost to Venezuela's agriculture and domestic industry.

The opposition-led lockout/stoppage, industry self-sabotage and months of political rebellion have recently prompted a run on the dollar, with the bolivar losing 25% already this year ... inflation is in excess of 30% and foreign reserves dropped $2 billion to some $11 billion.

El Nacional director Miguel Otero ... one of the opposition's leading mouthpieces ... complains that the central government could punish him by failing to authorize dollars for specially-imported newsprint, failing to recognize the fact that domestic paper-manufacturers can quickly produce sufficient supplies for all requirements.  Otero points to the fact that the opposition (when they were in government for more than 40 years) had themselves often used currency controls to restrict newspapers' ability to buy newsprint.

Meanwhile, attending a rally yesterday with a visiting delegation from the Peoples' Republic of China, Chavez Frias distributed Chinese-built farm tractors and property deeds to Venezuelan farmers ... he recalled that Chinese leader Mao Tse Dong had "planted the seed of the China which today has entered the 21st century as the vanguard of struggling nations ... a shining example to the peoples of the Third World ... to the poor people of this planet ... we in Venezuela are among them."