Venezuela Feb inflation at highest in seven years

www.forbes.com Reuters, 03.01.03, 11:12 AM ET CARACAS, Venezuela (Reuters) - Venezuela's inflation rate jumped to 5.5 percent in February, the highest monthly rise in nearly seven years as many imported goods became scarce after leftist President Hugo Chavez introduced foreign exchange controls. Annualized inflation rose to 38.7 percent compared with 13.7 percent a year ago as the nation's oil-dependent economy fell deeper into recession, the Central Bank reported Saturday. A recent national strike, called to try to force left-winger Chavez to resign and hold early elections, cut back oil output by the world's No. 5 oil exporter, forcing the government to introduce foreign exchange restrictions and price controls on basic goods earlier this year. The Central Bank blamed the sharp rise in February on the government's move to stop the purchase of U.S. dollars without state permission. "This figure was mainly due to ... new foreign exchange controls that directly affected imports and supplies ... and sparked distortions in the market," the bank said in a statement. Chavez set a fixed exchange rate of 1,600 bolivars to the U.S. dollar -- a 16 percent revaluation -- and put other restrictions in place to stop dollars being siphoned out of the country, further destabilizing an economy that had been reeling from the strike. While the strike petered out last month, the economy is still feeling the impact of lost oil production, the country's main source of revenue. Venezuela's inflation rate closed 2002 at 31.2 percent, the highest level in five years and more than double the 12.3 percent recorded in 2001. Inflation in January this year was 2.9 percent. The February rise was the highest since June, 1996, when prices rose 7.1 percent. The economy shrank 8.9 percent in 2002, according to the government. Economists and analysts polled by Reuters in February predicted a sharper contraction this year of more than 13 percent. The poll saw inflation rising to 42.8 percent in 2003 from 31.2 percent last year.