- The Washington Times - Thursday, January 23, 2003

CARACAS, Venezuela (AP) Venezuela's central bank suspended its foreign-exchange trading for a week starting yesterday to try to keep the country's currency, the bolivar, from further plummeting in the fallout of a 52-day-old strike that has crippled oil exports.
A new foreign-exchange policy will be revealed after five business days, the Central Bank and the Finance Ministry said in a joint statement. Central Bank Director Domingo Maza would not give more details.
The announcement led to speculation that the government was planning to impose exchange controls to protect its depleting foreign reserves and halt the slide of the bolivar, which has lost a quarter of its value this month.
"It sounds like exchange controls are on the way," said Miguel Octavio, executive director of local investment banker BBO Financial Services.
The suspension means that Venezuelans cannot buy foreign currencies for five business days. The government said it would continue to pay its foreign debts.
Exchange controls could help strengthen the bolivar by limiting the amount of dollars that individuals and banks can buy. But they could also hurt businesses that depend on dollars to pay for imported goods. Venezuela's economy is highly dependent on imports about 50 percent of food is imported.
Business leaders, labor unions and opposition parties started a strike on Dec. 2 to force President Hugo Chavez to resign or call early elections.
The strike has slashed Venezuela's oil production by two-thirds crippling an industry that provides 70 percent of export revenue and half of government income.
In a blow to opposition leaders, Venezuela's Supreme Court yesterday suspended a Feb. 2 referendum on Mr. Chavez's rule until it can determine whether it is legal.
Tens of thousands of Chavez opponents fought through bullets and tear gas Nov. 4 to deliver a petition signed by 2 million people required for holding the vote. The elections council set the vote for Feb. 2.
The bolivar currency reached a record low of 1,853 to the dollar Tuesday. It has lost 25 percent of the its value since the beginning of the year, after losing 46 percent of its value in 2002. The depreciation has contributed to 30 percent inflation.
Traders said the Central Bank has been injecting up to $70 million a day to protect the currency. Venezuela's foreign reserves stood at $11.05 billion Monday, down from $12.5 billion before the strike began. Venezuela also has $2.9 billion in a rainy-day fund that absorbs excess oil revenue.
Opposition and government negotiators are studying proposals made by former President Jimmy Carter to end the dispute over Mr. Chavez's rule.
The Nobel Peace Prize laureate proposed two plans Tuesday.
The first entails general elections and an end to the strike. The second proposal calls for both sides to prepare for a binding referendum on Mr. Chavez's presidency in August, the midpoint of his six-year term. Venezuela's constitution allows such a vote.
The first plan would amend Venezuela's constitution to shorten presidential and legislative terms of office and stage early elections.
It calls for the opposition to end the strike and for the government, which has a congressional majority, to move quickly on changing the constitution.
Amending the constitution requires the approval of congress and a popular referendum.
A so-called Group of Friends of Venezuela, a forum of six countries the United States, Mexico, Brazil, Chile, Spain and Portugal has been formed to help end the standoff.
Diplomats involved in the initiative will hold their first meeting at the Organization of American States in Washington tomorrow.

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