Venezuela's Chavez pushes Cenbank to cut rates

More Reuters, 03.26.03, 3:52 PM ET

CARACAS, Venezuela, March 26 (Reuters) - Venezuelan President Hugo Chavez threatened on Wednesday to challenge the Central Bank in the Supreme Court if the nation's top financial body did not cut current interest rates. Venezuela's government, struggling with a fiscal crunch after an two-month opposition strike disrupted its vital oil production, is scrambling to revive the recession-bound economy of the world's No. 5 petroleum exporter. Active interest rates -- the rates banks charge on loans -- range from 25 to 65 percent depending on the type of credit, according to the Venezuelan Banking Association. Chavez said the government had urged the Central Bank to consider cutting rates. "If they do not respond in a positive way, the government cannot just sit with its arms folded. If we have to go to the Supreme Court we will," Chavez told a conference of small-business owners. "Interest rates of about 45 percent just kill small firms. In Venezuela those rates should be about 30 percent," he said. In February firebrand leftist Chavez proposed introducing controls on commercial bank lending rates for the first time in seven years. But he has not followed through with those proposals. Venezuela's economy is mired in recession after contracting nearly 9 percent last year. The strike from December to January by oil workers and opposition groups failed to oust Chavez but further dented the economy. Oil provides about 50 percent of the government's revenues. Private sector activity has further stagnated since late January when the government introduced a strict foreign exchange control system, which has shut off access to foreign currency for more than 60 days.