Dollar Crunch Hits Venezuelan Businesses
www.belleville.com Posted on Wed, Mar. 19, 2003 CHRISTOPHER TOOTHAKER Associated Press
CARACAS, Venezuela - Jewelry, crystals and gold-encrusted statues normally fill Luis Pereida's gift shop in downtown Caracas. But his suppliers haven't brought him a shipment in three months, and the store's stock is dwindling.
The problem is a package of currency controls that President Hugo Chavez imposed on Jan. 21 to try to stop the free fall of Venezuela's bolivar. The rules restrict buying of dollars - and without dollars, the distributors who supply Pereida can't buy goods from abroad.
The shortage of greenbacks is beginning to hit business owners hard, and Pereida, for one, is worried.
"If this situation continues, I'll have to close my store," he said.
To try to cushion the blow for importers, the government exchange controls committee, or Cadivi, has declared some 6,000 goods essential - including some food products, medicines, personal hygiene items and industrial raw materials.
Importers of those goods, under the new regulations, will eventually be granted dollars. But as a result of delays in implementing the new system, not one dollar has been granted during the last 57 days.
The delay, coupled with restrictions on imported "luxury" goods like electronic entertainment equipment and jewelry, have many shop owners anxious and confused.
Some are buying dollars on the black market. The bolivar is set at a fixed rate of 1,598 to one dollar but it trades as high as 2,800 to the dollar on the black market.
Eduardo Gines, who owns an electronics store, said his suppliers are either selling inventories or buying black market dollars "because there is no other alternative."
The president of the currency committee, Edgar Hernandez, said Monday the government would begin granting dollars this week.
"We are doing the job as fast as possible," he said.
The currency control committee is supposed to sell $650 million this month, but economic analysts say only a fraction of it will go to the private sector for imports.
"This isn't enough," said Jose Pineda, chief economist at the Venezuelan American Chamber of Commerce and Industry, or VenAmCham. Importers need at least $800 million month, he said.
Pineda said the only the government is currently importing goods. In order to combat food shortages caused by the lack of available dollars, Chavez's government is importing food and using the military to distribute and sell it at markets for the poor.
Pineda estimates the government could use $400 million of the $650 million Cadavi is slated to grant in March, leaving the rest for importers, students studying abroad and people on business trips.
Imports averaged a bit more than $1 billion a month last year and are expected to fall by roughly half that amount because of the new rules.
Opposition leaders are demanding Chavez agree to early elections, blaming his left-leaning policies for the country's deepening economic crisis.
Chavez blames the economic downturn on his adversaries, who staged a two-month general strike this winter aimed at ousting him. The strike crippled markets, and the bolivar lost a quarter of its value before currency sales were halted.
The former paratrooper, who was elected in 1998 and re-elected in 2000, accuses opponents of leading "an economic coup" to remove him from office. He was briefly overthrown in April, but returned to power two days later.
Amid the turmoil, Fedecamaras, the nation's leading business chamber, said Monday that at least 30,000 businesses could go bankrupt this year.
Venezuela's economy contracted almost 9 percent in 2002, and Fedecamaras predicted that it will shrink another 17 to 36 percent in 2003.
On the Web Venezuelan Currency Administration Committee: www.cadivi.gov.ve