Chavez orders currency devaluation by 50% in Venezuela...
Chavez Says He’ll Seize Businesses That Raise Prices
By Daniel Cancel
Jan. 10 (Bloomberg) -- Venezuelan President Hugo Chavez said that businesses have no reason to raise prices following the devaluation of the bolivar and that the government will seize any entity that boosts its prices.
Chavez said he’ll create an anti-speculation committee to monitor prices after private businesses said that prices would double and consumers rushed to buy household appliances and televisions. The government is the only authority able to dictate price increases, he said.
“The bourgeois are already talking about how all prices are going to double and they’re closing their businesses to raise prices,” Chavez said in comments on state television during his weekly “Alo Presidente” program. “People, don’t let them rob you, denounce it, and I’m capable of taking over that business.”
Chavez devalued the bolivar as much as 50 percent on Jan. 8 for the first time in almost 5 years, as last year’s decline in oil revenue caused the economy to contract an estimated 2.9 percent, its first recession since 2003. The government set a multi-tiered currency system that Chavez says will stimulate national production by making imports more expensive.
The devaluation may add to inflation by 3 percent to 5 percent this year, Finance Minister Ali Rodriguez said. The government forecast an inflation rate of 20 percent to 22 percent this year, after consumer prices rose 25 percent, according to the National Consumer Price Index.
The government also will “attack” the so-called parallel exchange rate, which Chavez called “illegal.”
Venezuelans turn to the parallel rate when they can’t get government authorization to buy dollars at the official exchange rate. The bolivar traded at 6.25 per dollar on Jan. 8, traders said.
“They put the value of the dollar at more than 6 in an arbitrary and illegal manner,” Chavez said. “We have to organize to reduce and attack that speculative, illegal dollar that hurts the Venezuelan economy so much.”
To contact the reporter on this story: Daniel Cancel in Caracas at email@example.com.
Last Updated: January 10, 2010 13:15 EST
Chavez warns business after Venezuela devaluation
* Chavez orders National Guard to stop price rises
By Frank Jack Daniel
CARACAS, Jan 10 (Reuters) - Venezuela's Hugo Chavez ordered soldiers to seek out businesses that raise prices after a sharp devaluation of the bolivar currency last week, saying his government will not tolerate price gouging.
"Right now, there is absolutely no reason for anybody to be raising prices of absolutely anything," he said on his weekly TV show, two days after announcing a dual exchange system for the fixed rate bolivar.
"I want the National Guard on the streets with the people to fight against speculation," he said to applause. "Publicly denounce the speculator and we will intervene in any business of any size."
The socialist Chavez believes the state should have a hefty role in managing the economy. During his 11 years in office he has nationalized most heavy industries, while business and finance are tightly regulated.
The former paratrooper says the devaluation will help make Venezuelan companies more competitive but he warned the government would take over shops and give them to their workers if price rises were discovered.
After browbeating firms that might raise prices, Chavez announced a $1 billion fund for credits and subsidies to help diversify the economy and get industry back on its feet. He invited businessmen to round-table talks with the government.
"A billion dollars for the substitution of imports, starting with food," he said.
Venezuela's economy is largely dependent on oil exports and slipped into recession last year as crude prices fell and manufacturing and industry output crashed.
PROTECT THE POOR
South America's top oil exporter imports most consumer products. Under the new system, food and medicines will be imported at an exchange rate of 2.6 bolivars to the dollar while non-essential goods will be bought at a rate of 4.3 per dollar. Since 2005 the bolivar had been fixed at 2.15.
Venezuelans packed electrical goods stores on Saturday, fearing prices will double as the cost of imports rise.
Some analysts say the price impact of the devaluation will not be so severe, pointing out that in reality much of Venezuela's imports are already paid for with dollars bought on a semi-legal black market, where the bolivar is worth about a third of its official rate. It closed at 6.15 on Friday.
Other top officials have said in recent days that Venezuela's inflation, already the highest in the Americas at 25 percent last year, will be pushed up by the devaluation.
Chavez said the measures would make businesses and farmers more competitive and help wean the country off imported goods.
"This is going to mean more economic and financial strength for the government, for the oil industry, which belongs to us all, and therefore fiscal strength. We are going to have more resources for social investment," Chavez said on Saturday.
Chavez said subsidies introduced by his government, along with the stronger exchange rate for food and medicine would protect the poor from a bump in inflation.
"This government protects and will continue to protect the weakest with investment and with special attention," he said.
The devaluation is a relief for state oil company PDVSA, which has struggled to pay service providers and meet social spending requirements since crude prices dropped last year.
Holders of Venezuela's foreign debt are also pleased, since the devaluation improves government finances and lessens the need to issue more bonds.
Last month, BMO Capital Markets cut ratings on Colgate-Palmolive Co