Battered by strike, Venezuela's economy shrank nearly 9 percent last year

www.detnews.com Saturday, February 15, 2003 By Fabiola Sanchez / Associated Press

CARACAS, Venezuela -- A general strike and lingering recession have taken a heavy toll on the Venezuelan economy, which shrank nearly 17 percent in the final quarter of last year, according to figures released by the central bank on Friday. The nation's oil sector, which accounts for about a third of gross domestic product, contracted by nearly 26 percent in the fourth quarter as thousands of workers walked off their jobs while the government of President Hugo Chavez worked to restore production. Overall, the economy fell 16.7 percent in the fourth quarter and 8.9 percent for the entire year, according to a statement from the central bank. Most of the contraction in the economy was due to reduced oil production, a combination of Venezuela's adherence to lower production quotas established by the Organization of Petroleum Exporting Countries, followed by the general strike, which began Dec. 2. Venezuela is the world's fifth-leading oil exporter and is a leading supplier to the United States. The reduced production was one factor in higher U.S. gasoline and heating oil prices this winter. The general strike ended Feb. 4 in all areas except the oil industry. Chavez's opponents -- a mix of unions, business interests and conservative and leftist political parties -- called for the nationwide work stoppage to press for early elections. The government has restored oil output up to about half of pre-strike levels of 3.2 million barrels per day. Production fell as low as 200,000 barrels per day in December. Meanwhile, Central Bank director Domingo Maza said the government would lift a ban on dollar sales at the end of the month. The freeze was imposed during the strike to protect Venezuela's foreign reserves, which were reduced by panic dollar buying. Maza cited continued delays in establishing regulations for a new currency control system. Under the new rules, requests for foreign currencies could take three to four days to process, said Edgar Hernandez, the president of Venezuela's new currency exchange controls committee. Government officials had previously indicated that requests to buy or sell U.S. dollars and other currencies would take roughly 45 days. Chavez has said businesses that participated in the work stoppage will be denied dollars under the new policy. Business chambers, importers and hospitals warn the suspension of currency sales and bureaucracy in the new system will soon lead to shortages because they need efficient access to dollars to import goods. Venezuela imports more than 60 percent of its food, medicines and finished goods. On the Net: Government economic statistics, www.foronacional.gov.ve