By Andrew Cawthorne and Mario Naranjo, Reuters
CARACAS–Opposition leaders derided another currency devaluation by President Hugo Chavez’s government as evidence of economic incompetence, while some anxious Venezuelans hit the shops on Saturday in fear of price increases.
Although Chavez has not been seen in public since cancer surgery two months ago in Cuba, ministers said he personally ordered the fifth devaluation of the bolivar in a decade of socialist economics — this time by 32 percent. Seen as an imperative by economists but widely unpopular among Venezuelans, the measure is the biggest test yet for Vice President Nicolas Maduro, who has been in charge of the government since Chavez’s Dec. 11 operation. “The Maduro-Cabello duo are finishing off our Venezuela, we must not allow it!” said opposition leader Henrique Capriles, accusing Maduro and Congress head Diosdado Cabello of squandering revenue from high oil prices.
“They spent the money on (election) campaigning, corruption and gifts abroad. What a lying government!” he tweeted. Should Chavez not recover, Capriles, who lost last year’s presidential election, would likely face off with Maduro in a new vote. The devaluation, which takes effect on Wednesday, was announced before a four-day weekend for Venezuela’s Carnival holiday to minimize political or market repercussions. It had been widely forecast by economists as a way of redressing distortions including a black market rate for dollars at four times the old official level of 4.3 bolivars.
Raising the rate to 6.3 bolivars will boost state finances by providing more local currency for each dollar of oil export revenue. But it also hikes prices for imports crucial to the oil-dependent economy, potentially fueling inflation, although the state will seek to brake that through price controls. Many people ran to shops on Saturday in fear of quick price rises, although the rush was lighter than past devaluations, perhaps because so many Venezuelans were heading out on holidays.
Inflation has already spiked in the past two months to an annual rate of 22.2 percent. Further price hikes risk hurting Maduro and other senior officials’ popularity at a sensitive time given Chavez’s condition and a possible new vote. Wall Street Praise