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Venezuela loosens grip on currency in bid to ease crisis
CARACAS, Aug 3, 2018 (BSS/AFP) – Venezuela’s government on Thursday
loosened the tight currency controls it first put in place 15 years ago, in a
bid to attract foreign investment and ease a four-year recession that has led
to economic collapse.
The Constituent Assembly, dominated by President Nicolas Maduro’s
loyalists, announced the passage of a decree authorizing money exchange
operations.
The text establishes the “repeal of the illicit exchange law” that imposed
fines and up to 15 years of prison for those trading currency on the black
market.
The new rules grant citizens “the widest guarantees to improve their
participation in the socio-economic development of the country.”
Minister of Industry and National Production Tareck El Aissami said people
would now be able “make any exchange operation in a legal and safe way.”
The ruling comes two days after Maduro admitted his economic model had
“failed” and urged his loyalists to stop “whining” and find “solutions.”
In oil-rich, cash-poor Venezuela, whose economy crashed as crude prices
sank, the government of then-president Hugo Chavez in 2003 instituted strict
controls on its currency, the bolivar, and the country’s exchange rate — a
policy pursued by his successor, Maduro.
It gave the government a monopoly over foreign currencies such as the
dollar and euro, as well as exchange rate control.
It created a black market in which the dollar changed hands for 30 times
its official rate.
Analysts also criticized the controls for encouraging corruption and
accelerating hyperinflation.
MORE/HR/0918
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Compounded by US sanctions in response to accusations of political
repression by the government, Venezuela’s economy has continued to collapse.
The country has been paralyzed by food and medicine shortages, and failing
public services including water, electricity and transport.
Maduro’s sober admission of failure came after the International Monetary
Fund forecast a mind-boggling inflation rate of one million percent this
year.
The president has shown signs of trying to react to the crisis, announcing
in March a redenomination of the near-worthless currency involving the
removal of five zeros, a move analysts have branded as half-hearted.
The president also ordered state-owned oil company PDSVA to increase
production, currently at a 30-year low of 1.5 million barrels a day, just a
decade after reaching a high of 3.2 million.
He said on Tuesday he wants to increase production to “six million barrels
a day by 2025 or sooner.”
Maduro has been forced to act by the ever-worsening economic situation in
the country. Earlier this week, 80 percent of Caracas was plunged into
darkness by a power cut.
The IMF predicts GDP will plummet 18 percent this year, meaning a fourth
consecutive year of double-digit falls.
Industry is operating at just 30 percent while — despite the ever
diminishing oil production — crude oil sales account for 96 percent of the
country’s revenue.
BSS/AFP/HR/0920