Venezuelan Central Bank rejects Chavez's demand to set interest rates

<a href=www.sfgate.com>SFGate.com Friday, April 4, 2003
(04-04) 11:07 PST CARACAS, Venezuela (AP) --

Venezuela's Central Bank rejected President Hugo Chavez's demand that it impose fixed interest rates for private banks.

The Central Bank won't accept "pressure from anyone" to impose rates, director Domingo Maza Zavala said in comments published in Friday's El Universal newspaper.

On Wednesday, Chavez demanded the Central Bank force private banks to lower their borrowing rates, which range from 25 percent to 40 percent. Chavez argued the high rates were hurting small businesses and the government, which faces $4.6 billion in domestic debt payments this year. Venezuela's domestic debt totals $9 billion.

The Central Bank "has the legal right to set a ceiling for interests rates when it considers it convenient, not because of pressure," Maza Zavala said.

Venezuela hasn't had fixed interests rates since 1992.

Maza Zavala said the Central Bank would issue short-term loans to lower interests rates.

Private economists expect Venezuela's economy to shrink more than 20 percent this year, partly because of an unsuccessful strike to demand early elections. The two-month strike, which fizzled in February, paralyzed the world's fifth largest oil exporting industry and cost Venezuela $6 billion.