Venezuela says could end forex curbs in months

www.forbes.com Reuters, 02.26.03, 6:33 PM ET

CARACAS, Venezuela, Feb 26 (Reuters) - Venezuela's Planning Minister Felipe Perez said on Wednesday the government could end currency curbs and float the bolivar currency in four to six months if state oil firm PDVSA recovers production lost during a two-month opposition strike. "We believe in about four or six months we could have the problem resolved at PDVSA and the transition needed to guarantee the return of a floating system," Perez said. Venezuela's government imposed strict foreign exchange controls and price curbs in early February to shore up its strike-hit economy. Opposition leaders and dissident oil workers began the shutdown in December to pressure President Hugo Chavez to accept elections. The Venezuelan bolivar slipped about 24 percent against the dollar from the start of the year until the government closed the currency markets on Jan. 21, ending free flotation of the local currency. The new currency regime set a fixed exchange rate of 1,596/1,600 bolivars to the dollar. But the government has struggled to fine tune the new mechanisms and only a few banks have so far signed deals with the currency control board CADIVI. Perez said that the government was also studying a tax on currency transactions, but he did not provide more details. Chavez, an outspoken former paratrooper who brands his opponents terrorists trying to topple him, has said he will use the controls to deny opposition businesses access to dollars. Economists and opposition business leaders fear the currency curbs will create a thriving black market, hike inflation and severely restrict transactions in a nation which imports more than 60 percent of its goods. Venezuela's economy, already reeling from a sharp recession, could contract as much as 13.7 percent in 2003 as the lingering effects of the strike take a toll on the oil and non-oil sectors, according to a recent Reuters poll of analysts and economists. The government says output now stands at about 2 million barrels per day (bpd) compared with 3.1 million bpd that the world's No. 5 oil exporter produced before the strike. Estimates from rebel oil workers put production at about 1.5 million bpd. Oil exports, which account for half of state revenues, are at 1.5 million bpd compared with around 2.7 million bpd in November, the government says. But some analysts believe it will be difficult for the government to bring oil production above 2.2 million bpd this year.