GM restarts Venezuela assembly after forex squeeze
Forbes.com-Reuters Reuters, 04.22.03, 11:52 AM ET
CARACAS, Venezuela, April 22 (Reuters) - General MotorsCorp.'s (nyse: GM - news - people) Venezuelan unit, the biggest vehicle assembler in the South American country, has restarted production after a three-week halt caused by government foreign exchange controls, a spokesman said Tuesday.
"The plant has reopened; everything is back in business," General Motors Venezolana's marketing and sales director Peter Friedrich told Reuters.
He added that in talks with the government, the company had succeeded in ironing out the problems caused by the currency curbs which had forced General Motors to temporarily suspend assembly operations in Venezuela at the end of March.
Squeezed by a crippling opposition strike that slashed vital oil exports, leftist President Hugo Chavez's government halted foreign currency trading in January, tightly restricting the supply of U.S. dollars to the economy.
Venezuela's foreign-owned vehicle assemblers, along with other local manufacturers dependent on imports, had been unable to import essential parts due to the tight restrictions and more than two months of delay in the allocation of dollars.
The restart of GM's Venezuelan unit indicated that the government was moving, albeit slowly, to activate mechanisms to allocate hard currency to health, food and industrial sectors.
But private business leaders have fiercely criticized the forex controls, introduced to stem heavy capital flight and halt a sharp slide in the bolivar currency triggered by the opposition strike in December and January. They say many local companies will face bankruptcy because of the curbs.
Friedrich said the government had widened the list of imported car components for which dollars would be allocated, removing an obstacle that had hindered General Motors' assembly operations. The company was also registering itself on a list of importers and exporters authorized to receive dollars.
After losing exports for March and April, General Motors Venezolana expected to be able to complete its scheduled May exports of models to Colombia and Ecuador. "We are very optimistic that we can fulfill our schedule," Friedrich said.
STORM OF COMPLAINTS OVER CONTROLS The state currency control board Cadivi has said it will give priority in the allocation of dollars to essential food and medicine imports, and to inputs for strategic industries.
Venezuela's state news agency Venpres said Cadivi had so far authorized dollars to more than 100 companies, including the Venezuelan units of Swiss food maker Nestle SA <NESZn.VX>, U.S. food manufacturer Kraft Foods Inc. (nyse: KFT - news - people), U.S. cereal maker Kellogg Co. (nyse: KFT - news - people) and U.S. grains trader Cargill Inc.
But problems persist. Venezuela's No. 1 telephone companyCANTV <TDVd.CR> (nyse: VNT - news - people) said last week the lack of a working conversion mechanism under government foreign exchange controls meant foreign shareholders would probably be unable to receive in dollars their share of a dividend due April 23.
CANTV's main shareholder is U.S. telephone company Verizon Communications Inc. (nyse: VZ - news - people). Private sector business leaders have pilloried the currency controls as restrictive and unworkable, warning that the dollar drought will stifle business and swell Venezuela's jobless rate, which the government estimates at 16 percent. Private economists say the real figure is far higher.
Businessmen and economists have severely questioned the technical ability of the currency board Cadivi, which is headed by retired army officer Edgar Hernandez, a political ally of former paratrooper Chavez. Both took part in a botched coup attempt in 1992.
Despite the barrage of complaints from foreign and local businessmen, populist Chavez has effusively praised Cadivi, saying it was doing a "tremendous job."
The president said the controls were "here to stay," although some of his ministers have said they will eventually be lifted as the oil-reliant economy shows signs of recovery.
Opponents in the business community have accused Chavez of using the controls in a political vendetta to deny access to dollars to firms which supported the grueling opposition strike in December and January. The stoppage tried unsuccessfully to force him to resign and hold early elections.
Copyright 2003, Reuters News Service