Posted on 01/22/2003 6:24:06 AM PST by blam
Wednesday, 22 January, 2003, 13:36 GMT
Venezuela suspends currency markets
Firms are operating in a hostile environment
Venezuela's will close its currency markets for five days in an attempt to stem capital flight. The country's currency, the bolivar, has lost almost a quarter of its value since the start of the year, while the economy has been crippled by a seven-week opposition strike against President Hugo Chavez.
And as the political and financial turmoil increases, more multinational firms are fleeing Venezuela.
Microsoft is the latest firm to close its two Venezuelan offices, while Ford Motors has told its employees to leave next week.
Breathing space
"Trade in foreign currency in the country is suspended for five banking days," Finance Minister Tobias Nobrega and central bank president Diego Luis Castellanos said in a statement.
A large number of companies are teetering on the brink of bankruptcy
In the official decree, the Finance Ministry and the central bank are authorised "to establish... temporary measures setting limits and restrictions on the convertibility of the national currency and the transfer of funds abroad".
However, it is unclear yet what these measures would be.
The government is likely to hope that the suspension will give enough breathing space to either break the strike or come up with measures that stop domestic and foreign investors to move their money abroad.
The strikes have focused on Venezuela's oil industry, the country's main earner of hard currency.
Bankruptcy fears
A general strike against President Hugo Chavez has now paralysed the country for more than 50 days.
One person died and more than 20 were injured during street protests on Monday.
The stoppage has crippled oil production in the country - the world's fifth largest oil exporter before the strike.
There are also growing fuel and food shortages.
"A large number of companies are teetering on the brink of bankruptcy and are desperate to find someway to limit the ongoing damage," said Erick Ekvan, a corporate consultant in Caracas.
Divided opinion
Banks are shut for most of the day, there are long queues to pay utility bills and the shopping malls are empty, Mr Ekvan told the BBC's World Business Report.
Public opinion has polarised between those who feel the strike has gone on too long and those who are determined to oust President Chavez at whatever cost.
Opposition leaders called the work stoppage to force President Chavez to call early elections, accusing him of concentrating power and plunging the country into recession.
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My Kruggerrands are doing okay.
The one thing that leftists can't control is finance. It's their achilles heel. The marketplace always casts the most powerful vote, and while leftists can hang onto power longer in spite of it, it always gets them in the end.
The marketplace is voting on Chavez.
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