Venezuela to Sell Foreign Currencies

seattlepi.nwsource.com Tuesday, February 18, 2003 · Last updated 1:39 p.m. PT THE ASSOCIATED PRESS

CARACAS, Venezuela -- Venezuela will begin selling foreign currencies, under stringent restrictions, through state-run banks, the president of the nation's exchange control commission said Tuesday.

The announcement by Edgar Hernandez came as the exchange control commission, or Cadivi, signed agreements with the Banco Industrial and the Andes Development Bank, both run by the government.

"The objective is opening operations for buying currencies," said Hernandez, adding the two banks would begin exchange operations "as soon as possible."

Hernandez said he expects private banks to sign similar agreements within a week.

The government suspended foreign exchange sales Jan. 21 as panic buying of U.S. dollars amid a two-month general strike led to a drastic drop in foreign reserves.

The suspension was also meant to give the government time to hammer out details of an exchange controls plan, which fixes the local bolivar currency at a rate of 1,598 bolivars to one U.S. dollar.

The bolivar is trading between 2,200 and 2,500 to the dollar on the black market.

Opponents of President Hugo Chavez fear the new exchange controls system could be used by the government to punish its detractors, including businesses that participated in the strike to unseat him. The strike ended on Feb. 4 in all sectors except the all-important oil industry.

More than 60 percent of the food, medicines and finished goods consumed by Venezuelans are imported. Without access to the dollars needed for imports, businesses are partly paralyzed and there are shortages of some goods.

Last year, annualized inflation hit 31 percent, sparked by a 46 percent devaluation of the bolivar. The currency devalued a further 25 percent this year before the halt on currency trading was imposed.

Chavez, who was elected in 1998 and re-elected in 2000, claims the nation's economic problems are the result of an "economic coup" led by his opponents.

Venezuela's opposition, a coalition of political parties, labor unions and business groups, accuses Chavez of trying to quash dissent and establish a Cuban-style dictatorship in the South American nation.