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Bank Worries Over Currency Slide

September 13, 2002

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CARACAS, Venezuela (AP) _ Venezuela’s central bank president said Thursday the government could move next week to ease the bolivar currency’s slide against the U.S. dollar.

Citing a rapid depreciation, Domingo Maza Zavala said the bank would wait at least until the weekend to decide whether to strengthen the bolivar, Globovision television reported. One way would be to tax dollar purchases, he said.

Zavala said Venezuela’s ``economic fundamentals are solid,″ but that private sector investment is needed to jump-start the economy and stabilize the exchange rate.

The bolivar closed Thursday at 1,477 to the dollar, compared to 763 per dollar on Jan. 1. Venezuela abandoned strict exchange controls in February to stop spending tens of millions of dollars to support the bolivar.

An April coup that briefly ousted President Hugo Chavez and continuing political instability have led Venezuelans to send capital abroad, weakening the local currency. Venezuelan media speculated Thursday that the government could soon impose exchange controls.

Chavez fed that speculation Thursday by denouncing what he called a ``conspiracy″ by opposition business interests to accelerate depreciation and destabilize his government.

He said his administration is prepared ``to defeat currency speculation.″

Planning Minister Felipe Perez has said the bolivar should strengthen to 1,350 by year’s end. Private analysts see it dropping below 1,600.

Commerce Minister Ramon Rosales dismissed the possibility of exchange controls but said that ``we know who is speculating″ against the dollar. ``This is a small country, and everyone knows everybody here,″ Rosales said.

Venezuela’s economy shrank 7.1 percent the first half of 2002, according to the Central Bank. Official unemployment is at 16 percent, and January-to-August inflation approached 20 percent, compared to 8 percent for the same period in 2001.

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