Venezuelan Supreme Court rejects forex petition

Reuters, 06.05.03, 5:37 PM ET CARACAS, Venezuela, June 5 (Reuters) - Venezuela's Supreme Court on Thursday rejected a lawsuit that sought to suspend the state's tough currency controls, but the tribunal must still rule on whether the curbs are unconstitutional. The government introduced the foreign exchange regime four months ago to halt capital flight and a slide in the local bolivar currency after a two-month opposition strike failed to oust President Chavez but sent the economy reeling. A group of lawyers, some representing business clients, have introduced several petitions in an attempt to have the control system declared unconstitutional. "This means that (the court) has rejected the petition to suspend the effects of the currency controls while they decide on whether they are constitutional," one attorney, Henry Pereira, told Reuters by telephone. The control regime, which followed the shutdown of the foreign exchange market from Jan. 22, has been criticized by private sector representatives and even government officials for its slow allocation of dollars to an economy that relies on imports for 60 percent of its consumer goods. A central bank director, Armando Leon, warned Wednesday that the economy of the world's No. 5 oil exporter would sink deeper into recession if the currency board kept its tight strangle hold on the access to U.S. currency. Joining the chorus of criticism of the currency controls, the Venezuelan-German Chamber of Commerce and Industry Wednesday called on the government to ease the curbs to help companies already struggling with the recession. Venezuela's gross domestic product (GDP) slipped nearly 30 percent in the first quarter of 2003 as it was battered by the strike that choked off vital oil output and squeezed by the drought in dollars caused by the currency curbs. While the government argues it has managed to bolster international reserves and the investment image of the country, opposition and private sector representatives say the curbs have worsened the economic crisis, increased unemployment and driven up inflation.