Venezuela faces dollar dilemma

Posted on Mon, Mar. 31, 2003
INTERNATIONAL BY MARIKA LYNCH mlynch@herald.com

CARACAS - Jose Luis Rosal fell off a pick-up truck and needed 15 stitches in the crown of his head. But the hospital in his hometown, about an hour outside the capital, couldn't do an X-ray to see if he had a skull fracture because it didn't have the materials.

Three days later, 20-year-old Rosal waited seven hours outside a Caracas hospital for an X-ray.

Like many Venezuelan companies and institutions, the country's chronically strapped hospitals and their patients have been further pinched since the government stopped selling U.S. dollars needed to import supplies, medicine and other goods.

The government imposed the currency controls two months ago, after a national strike aimed at ousting President Hugo Chávez failed and all but shut down the oil industry -- the country's primary source of foreign exchange. With the bolívar, the nation's currency, plummeting and fears of capital flight increasing, the government imposed controls to keep dollars in the country.

But since Venezuela relies heavily on imports bought with U.S. currency, the dollar drought is creating ripples throughout the economy.

Pharmacists say they have a three-week stock of medicines and then ''the Venezuelan health system could collapse,'' said Edgar Salas Jimenez, president of the Venezuelan Pharmaceutical Association.

Manufacturers and distributors are running through inventories, and they warn that goods from toilet paper to electronics could become scarce. Meanwhile, farmers say their crops will be thinner this year without the proper imported fertilizers. Then they'll have to scrounge for packaging material to wrap what is produced.

Big business, shopkeepers, and even street vendors like Fortunata Humani, who sells bikinis and lace panties from a sidewalk stall, expect to feel the dollar crunch. Wholesalers already have warned Humani their imported inventory is sparse. Humani, 46, says she may have to start sewing her own clothes -- if she can find the material.

The Venezuelan economy, private analysts say, could shrink up to 30 percent this year, and currency controls will be a factor.

''They are destroying the entrepreneurial fervor of the Venezuelan people -- what little there is left,'' said economist Orlando Ochoa.

Venezuela's economic problems already are affecting Florida. Nearly $3 billion in Venezuela-bound exports -- from machinery to medicines -- passed through Florida's ports in 2001, according to Enterprise Florida, the state public/private economic development agency. Last year Florida's exports to Venezuela fell to $2.1 billion.

The currency controls also prohibit Venezuelans from using credit cards abroad, which could cut into their shopping in South Florida stores. Business travelers will be allowed to get dollars, but only $1,000 per trip. Trips are limited to three per year.

This week, the government said it started selling some of a $645 million monthly allotment of U.S. dollars to be used for purchasing goods such as food and medicine that are on a priority list.

A newly-created government agency will decide who gets the greenbacks, and only a fraction will actually be given to private importers, said Jose Piñeda, head economist for the Venezuelan American Chamber of Commerce and Industry. The government will use some, he said, to import food and distribute it to the poor at markets.

Venezuela has imposed currency controls twice in the past two decades, and both periods ended with high inflation, Piñeda said. This time, though, the economy has already been weakened by the two-month strike, and the impact of currency controls could be worse.

Business leaders want a parallel dollar market, where they can buy currency at a higher rate than the established 1,600 bolívares to the dollar. So far the government has shunned the idea. Some businesses are already turning to the black market, where the rate is $1 to 2,800 bolívares.

There are also fears in business circles that the government currency agency will use its power to punish people who supported the national strike and oppose President Chávez.

Such concern isn't unwarranted. Chávez has said that ''not one dollar'' will go to the ''coup-plotters,'' his name for those who tried to force him out through the strike, which ended in February.

First elected in 1998, Chávez was briefly ousted by a coup last April. A coalition of union, oil and business leaders tried again via the strike route but failed to topple him or force new elections.

Meanwhile, Venezuela's newspaper owners fear that newsprint will not get on the import list, for political reasons. Their newspapers have been highly critical of Chávez. Newsprint first appeared on the list for a day, then was quickly removed. But officials have since said it will be restored.

On average, local newspapers have enough newsprint in stock to keep printing through April and into May.

But if newsprint doesn't appear on the priority import list, ''we're going to be the first country in the world without a newspaper,'' said Miguel Henrique Otero, publisher of the daily El Nacional.