- The Washington Times - Tuesday, January 1, 2008

CARACAS, Venezuela — Venezuela is introducing a new currency with the new year, hoping to fight inflation by lopping off three zeros from denominations.

President Hugo Chavez’s government says the new currency — dubbed the “strong bolivar” — will make daily transactions easier, contain rising prices and strengthen the economy.

“We’re ending a historical cycle of … instability in prices,” Finance Minister Rodrigo Cabezas said yesterday, adding that the change aims to “recover a bolivar that has significant buying capacity.”

Prices have risen as Mr. Chavez has pumped more of the country’s oil income into social programs, reinforcing his support among the poor and helping to drive 8.4 percent economic growth in 2007.

The Central Bank is promoting the new monetary unit with an ad campaign and the slogan: “A strong economy, a strong bolivar, a strong country.”

Officials, however, have yet to articulate their anti-inflationary measures.

Some Venezuelan critics, meanwhile, have dubbed the new currency the “weak bolivar,” noting that its predecessor, the bolivar, has seen its purchasing power suffer in an economy where inflation ran about 20 percent in 2007 — the highest in Latin America.

Venezuelan economist and pollster Luis Vicente Leon said that although the new currency may provide “the perception of stability” for some, it is largely a “cosmetic change.”

Government officials say the change is overdue to bring Venezuelan denominations into line with those of other countries in the region. Instead of denominations in the thousands, the largest new Venezuelan note will be 100 strong bolivars.

“It was necessary to leave behind the consequences of a history of high inflation,” Central Bank president Gaston Parra said in a televised year-end speech. He said officials aim “to reinforce confidence in the monetary symbol.”

The new money was distributed to banks and automated teller machines nationwide ahead of today’s introduction and will be phased in during the next six months. Venezuelans will be able to use both old and new bolivars during the transition.

Venezuela has had a fixed exchange rate since February 2003, when Mr. Chavez imposed currency and price controls. The government said it is not considering a devaluation any time soon.

But while the strong bolivar’s official exchange rate will be fixed as 2.15 to $1, the black-market rate has hovered at about 5.60 to $1 recently.

Venezuela’s currency has long been named after independence hero Simon Bolivar, who is pictured on the new 100 strong bolivar bill.

The new money is the latest in a series of changes to national symbols during Mr. Chavez’s presidency. He also redesigned the national seal and flag and renamed the country the Bolivarian Republic of Venezuela.

With the new currency, the government also is resurrecting a 12.5-cent coin, called the “locha,” which has not been used since the 1970s.

Meanwhile, Mr. Chavez granted amnesty yesterday to many opponents accused of supporting a failed 2002 coup that briefly drove him from power.

He said he signed an amnesty decree that also would pardon others accused of attempting to overthrow his government in recent years.

“It’s a matter of turning the page,” he said in a telephone call to state television on New Year’s Eve. “We would like a country that moves toward peace.”

Mr. Chavez was ousted by dissident military officers, but was returned to the presidency by loyalist generals within two days amid street protests by his supporters.

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