asia.reuters.com Wed January 22, 2003 08:09 PM ET By Patrick Markey

CARACAS, Venezuela (Reuters) - Venezuela on Wednesday suspended foreign exchange trading in a desperate bid to stem capital flight and a slide in the bolivar as the government battled an opposition-led strike that has drained its oil-reliant economy.

The Central Bank said it would close the foreign exchange market for five trading days and prepare temporary currency exchange and transfer curbs to fend off the impact of the strike aimed at forcing leftist President Hugo Chavez to resign and accept elections.

The economic measures were announced hours before the Supreme Court delivered a blow to the opposition campaign by suspending a nonbinding Feb. 2 referendum they were planning to hold on the president's rule.

Venezuela's bolivar currency has tumbled more than 28 percent during the seven-week-old work stoppage and its international reserves have dipped since the strike began on Dec. 2. The stoppage has slashed oil output in the world's No. 5 petroleum exporter to a fraction of normal levels.

Chavez, a fiery populist who brands foes as "terrorists" trying to topple him again through an "economic coup," said the government planned currency curbs, but did not elaborate.

"This is a measure to defend our economy and the bolivar," Chavez told a military parade in Caracas.

Economists said exchange controls would give the economy short-term relief, but it would suffer later as long-term controls would trigger black market trading and restrict private sector transactions.

"This looks more like a kneejerk reaction to the currency weakness," Jose Cerritelli, an Andean debt strategist for Bear Stearns, said. "But in the long term, people look to escape the controls by taking their money out."

Opposition leaders hope their strike will pressure former paratrooper Chavez to agree to early elections. They say he has driven Venezuela toward economic ruin and Cuba-style communism. But Chavez, who was elected in 1998 and survived a coup in April, has refused to quit and vows to defeat the strike.

COURT DECISION RILES OPPOSITION

Negotiations to resolve the conflict are stalled over the timing of possible elections. Former U.S. President and Nobel Peace Prize winner Jimmy Carter on Tuesday proposed a blueprint for elections that would also end the strike.

His proposal suggested two options: a constitutional amendment to trigger early elections or a binding Aug. 19 referendum as allowed under the constitution. Both sides are analyzing the Carter initiative.

The Supreme Court decision to suspend the Feb. 2 referendum inflamed tensions between Chavez and his foes. At least six people have been killed in clashes since the strike began.

Chavez, who led a botched coup six years before his victory at the polls, welcomed the court decision as "good news."

The president's supporters planned huge rallies throughout the capital on Thursday in a show of strength.

Outraged opposition leaders condemned the court's ruling as a biased political decision and accused Chavez of deliberately blocking their campaign to call elections.

"It's unacceptable. It's a blow to the hopes of millions of Venezuelans who are expecting an electoral solution to the crisis," opposition negotiator Rafael Alfonzo said.

The referendum would not have legally forced Chavez from power. But the opposition hoped a decisive rejection of his government would have vindicated their calls for elections. Chavez dismissed the poll as illegal and urged foes to wait until the August referendum.

ECONOMIC CRUNCH, FEARS OVER DEBT

The economic crunch has raised fears Venezuela may default on its foreign debt. But the Central Bank said the government would maintain the necessary operations to make debt payments.

Venezuela's international reserves have fallen to $11.05 billion, a drop of 7.5 percent so far this year. The government also has $2.85 billion in its FIEM rainy-day savings fund and insisted recently that hard currency levels were sufficient.

Finance Minister Tobias Nobrega said the government planned to slash its 2003 budget by 10 percent, extend a temporary bank debit tax through 2003 and continue with a domestic public debt swap to counter the economic damage of the strike.

Chavez has fought back against the shutdown, sending troops to seize control of oil installations and refineries and importing food and gasoline to offset shortages.

Strike leaders say the government has failed to break the stoppage. But in a first sign of a crack in the strike, some tanker pilots in the key western oil and shipping hub of Maracaibo went back to work this week.

money.cnn.com January 22, 2003: 7:42 PM EST

CARACAS, Venezuela (Reuters) - Venezuela's Supreme Court on Wednesday dashed opposition hopes of testing leftist President Hugo Chavez in a national vote next month by suspending a planned nonbinding referendum on his rule.

Although Chavez was not obliged to abide by the Feb. 2 referendum, his foes had hoped to use it to try to inflict a political defeat on the leftist leader, who is battling a seven-week-old opposition strike in the world's fifth-largest oil exporter.

The shutdown, aimed at forcing Chavez to resign or call early elections, has slashed the country's vital oil exports and pushed the economy deeper into recession.

In its ruling, the Supreme Court accepted a formal government appeal and ordered the National Electoral Council to suspend the February referendum and refrain from organizing other elections for the moment.

"This means that the referendum is frozen," council member Romulo Rangel told reporters.

The government hailed the court ruling. "We always refused to recognize (the Feb. 2 referendum), but now the Supreme Court has confirmed our position," Vice President Jose Vicente Rangel said.

Opposition leaders condemned it as a biased political decision and accused Chavez of deliberately blocking their campaign for early elections on his rule.

"It's unacceptable. It's a blow to the hopes of millions of Venezuelans who are expecting an electoral solution to the crisis," opposition negotiator Rafael Alfonzo told reporters.

Supporters of Chavez, elected in 1998 six years after leading a coup attempt, planned a big show of strength in the capital on Thursday in rallies billed by the government as "the taking of Caracas."

Fearing a repeat of violent clashes that have killed at least six people and wounded dozens since the strike began on Dec. 2, opposition leaders urged their followers to stay home. But opposition marches would be held in other cities.  

www.alertnet.org 23 Jan 2003 00:00

(Recasts, adds quotes, details of Thursday's marches) By Pascal Fletcher

CARACAS, Venezuela, Jan 22 (Reuters) - Venezuela's Supreme Court on Wednesday dashed opposition hopes of testing leftist President Hugo Chavez in a national vote next month by suspending a planned nonbinding referendum on his rule.

Although Chavez was not obliged to abide by the Feb. 2 referendum, his foes had hoped to use it to try to inflict a political defeat on the leftist leader, who is battling a seven-week-old opposition strike in the world's fifth-largest oil exporter.

The shutdown, aimed at forcing Chavez to resign or call early elections, has slashed the country's vital oil exports and pushed the economy deeper into recession.

In its ruling, the Supreme Court accepted a formal government appeal and ordered the National Electoral Council to suspend the February referendum and refrain from organizing other elections for the moment.

"This means that the referendum is frozen," council member Romulo Rangel told reporters.

The government hailed the court ruling. "We always refused to recognize (the Feb. 2 referendum), but now the Supreme Court has confirmed our position," Vice President Jose Vicente Rangel said.

Opposition leaders condemned it as a biased political decision and accused Chavez of deliberately blocking their campaign for early elections on his rule.

"It's unacceptable. It's a blow to the hopes of millions of Venezuelans who are expecting an electoral solution to the crisis," opposition negotiator Rafael Alfonzo told reporters.

Supporters of Chavez, elected in 1998 six years after leading a coup attempt, planned a big show of strength in the capital on Thursday in rallies billed by the government as "the taking of Caracas."

Fearing a repeat of violent clashes that have killed at least six people and wounded dozens since the strike began on Dec. 2, opposition leaders urged their followers to stay home. But opposition marches would be held in other cities.

SHOULD HE STAY OR SHOULD HE GO?

Electoral authorities had set the referendum for Feb. 2, after the opposition collected more than 2 million signatures to request the vote. It would have asked voters whether or not the president should resign.

Chavez, who has refused calls to resign and hold early elections, objected to the vote as unconstitutional, and his supporters appealed to the Supreme Court to stop it from going ahead. Wednesday's decision opened the way for the National Assembly to appoint a new electoral body. The government has a slim majority in the assembly.

Chavez, who survived a brief coup by rebel military officers in April, had already said he would ignore the result of the February referendum, even if he lost by 90 percent.

Chavez tells his foes they should wait until Aug. 19, halfway through his term, when the constitution allows for a binding referendum on his rule, which is scheduled to last until early 2007.

www.channelnewsasia.com First created : 23 January 2003 0832 hrs (SST) 0032 hrs (GMT) Last modified : 23 January 2003 0832 hrs (SST) 0032 hrs (GMT)

Oil prices eased in New York dealings on Wednesday on signs of progress in efforts to end a strike by Venezuela oil tanker pilots, but fears of a war in Iraq kept market nerves taught.

However traders warned against reading too much into the market retreat, especially as a cold front hit the northeastern United States.Advertisement Moreover fears over a war in Iraq still haunted the market.

US leaders have expressed frustration at European-led opposition to a military strike against Iraq as the top US general said the United States can sustain a major force in the Gulf for several months if needed.

New York's light sweet crude March-dated contracts fell 34 cents to US$32.85 a barrel.

Earlier in London, the price of benchmark Brent North Sea crude oil for March delivery tumbled 37 cents to US$30.37 a barrel.

On Wednesday, the Algerian oil minister has warned that the Organisation of Petroleum Exporting Countries would not be able to compensate an expected shortfall of supplies of around five million barrels per day in the case of a war on Iraq before the Venezuelan strike ends.

asia.reuters.com Wed January 22, 2003 07:29 PM ET

CARACAS, Venezuela (Reuters) - Venezuelan President Hugo Chavez said on Wednesday his government would introduce foreign exchange controls to halt capital flight and defend the country's bolivar currency, battered by a seven-week-old opposition strike.

"Together with the Central Bank, in accordance with the constitution, we will establish exchange controls to strengthen our international reserves and defend the bolivar," Chavez said in a speech at a military ceremony in Caracas.

He spoke hours after his government announced it was suspending foreign exchange trading for five market days from Wednesday while it prepared temporary restrictions on currency exchange and transfers to counter the financial damage caused by the strike, now in its eighth week.

Chavez did not give details of the controls being prepared.

Venezuela's bolivar currency has tumbled more than 28 percent during the shutdown and its international reserves have dipped since the crisis began. The strike has slashed oil output in the world's No. 5 petroleum exporter to a fraction of its normal levels.