Chavez on a 5b dollar injection

September 18, 2009

, CARACAS, Sep 18 – Venezuela\’s government is injecting five billion dollars into its domestic market, and will increase the supply of dollars at the official exchange rate, President Hugo Chavez said Thursday.

The steps are being taken as part of a package of 40 economic measures seeking to bolster the country\’s economy.

"About 40 decisions on the economic front will be announced to the world in the coming hours," Chavez told reporters at the presidential palace in Miraflores.

Without detailing all the measures, he announced that the government had decided to "speed up the delivery of foreign currency" at the official exchange rate of 2.15 bolivars to the dollar.

He also said liquidity would be injected into the domestic market.

"I have signed approval for the injection of 10,000 billion bolivars, five billion dollars, and we will sell it in a month because liquidity is very high. It is a country with a strong economy," he said.

Venezuela has since 2003 had strict exchange controls and Chavez acknowledged that the government body that deals with the administration of foreign currency has slowed delivery of dollars at the official rate "a little bit, because of the global crisis."

That has forced many importers to change dollars at black market rates that are significantly higher than the government\’s official rate.

Chavez said his government had "sought in recent weeks to reduce the gap between the official dollar rate and the black market rate."

The government is also fighting to lower the inflation rate, which was at an accumulated rate of 15.6 percent in August, but Chavez said had been significantly reduced from the 30.9 percent rate at the end of last year.

Venezuela\’s GDP contracted by 2.4 percent in the second quarter of 2009, after 22 consecutive quarters of growth.

The second package of measures will be implemented "on October 1 and will seek to produce a reactivation of the economy in the final quarter," Chavez said.

In March, Chavez announced a series of budget cuts and a raise in the country\’s VAT, but ruled out devaluing the bolivar, or raising the price of petrol (gasoline), which is the lowest in the world and has not been adjusted in 10 years.

Separately Chavez said Thursday that the government would expropriate coffee companies that are not functioning "in the state\’s interest."

"Either they get in step with what the Constitution sets out, with a socialist initiative, or we will expropriate them, no problem," Chavez warned. "If they give me excuses, I will expropriate them and we will turn them into property of society in workers\’ hands."

The president stressed that the constitution "does not deny anyone\’s right to private property, it just says that it must be subordinate to the interest of the State. … One of the things that is banned here by law are monopolies."

Since August 3, the government has seized control of operations at two local coffee companies, Fama de America and Cafe Madrid, that produce 80 percent of what is consumed in the local market, arguing that they were monopolies causing artificial shortages.

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