Venezuelan Economic Crisis Muddies Political Feud

abcnews.go.com — By Patrick Markey

CARACAS, Venezuela (Reuters) - Venezuelan President Hugo Chavez's government sparred with its foes on Friday over tough new foreign exchange and price controls as the nation's growing economic crisis complicated their political battle.

Local currency markets, closed two weeks ago to protect the nation's reserves and bolivar currency from a two-month opposition strike that failed to oust Chavez, remained suspended on Friday as the government struggled to define details of the new curbs.

Edgar Hernandez, the head of a five-member government agency created to oversee the controls, said it would soon set requirements for exporters and those who want to buy dollars for tourism or business trips overseas.

Opposition leaders, an alliance of political parties and private-sector representatives, warned the curbs would weaken Venezuela's battered economy. Accusing Chavez of ruling like a dictator, they predict he will use currency curbs to conduct a witch hunt of opposition businesses.

"We are worried about the time they are taking to establish the new controls. Up until now they have only put out the regulations for the public sector, but not for tourists or for the private sector," said Rafael Alfonzo, an anti-Chavez business leader and opposition negotiator.

Chavez, a populist first elected in 1998, introduced the controls after economic uncertainty sent the bolivar tumbling by nearly 30 percent during the opposition strike aimed at forcing him from office.

The former paratrooper, who survived a brief coup last year, threatened to use the new controls to limit his foes' access to U.S. currency. He has refused to step down.

Most private-sector businesses have returned to work after the opposition strike that began on Dec. 2. Strikers at state oil firm PDVSA are maintaining their shutdown of the oil exports that account for half the government's revenues.

Chavez says the government brought oil production back to nearly 2 million barrels a day using troops and replacement crews. Strikers say output is still about a third of the usual 3.1 million barrels per day in the world's fifth-biggest oil exporter.

POLITICAL FIGHT DEADLOCKED

Under the new foreign exchange system, the bolivar was set at a fixed rate of 1,600 bolivars to the dollar -- a 16 percent revaluation from the 1,853 bolivars rate at which it last traded. The controls also tightened access to U.S. currency and imposed price ceilings on basic food goods and services.

Economists have warned the curbs will create a black market as Venezuela's private firms -- heavily reliant on dollars for the imports that make up 60 percent of the nation's consumer goods -- skirt the restrictions. Imported goods will become scarcer and prices will climb, analysts said.

The fiscal crisis and the currency controls have become the focus of the political battle between Chavez and the opposition. Talks between the feuding parties have stalled over the timing of possible elections.

Jimmy Carter, the former U.S. president and Nobel Peace Prize winner, who is backing negotiations led by the Organization of American States, urged both sides on Friday to work to end their dispute through the ballot box.

Carter has proposed two electoral options: a constitutional amendment to shorten the president's term and trigger elections, or a referendum on Aug. 19. The government has dismissed the amendment option and responded evasively about the August referendum.