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Thursday, 6 February, 2003, 06:04 GMT
Venezuela pegs currency to US dollar
1000 bolivars
Venezuela has pegged its currency at a rate 17% stronger than what it last traded at to protect its foreign cash reserves.

Venezuelan President Hugo Chavez made the move as substantially reduced, two-month-old strike by opposition groups continues to drag on the economy.

"It's a positive measure we are taking to defend our economic sovereignty," he said.

The government fixed the exchange rate at 1,598 bolivars to the US dollar.

The Venezuelan currency last traded at 1,853 to the dollar when the government halted trade on 22 January.

Mr Chavez said foreign debt payments and the import of basic foods and medicines would be a priority.

Economic defence

The country's foreign reserves are in a strong position after Mr Chavez's fourth year in office.

Despite falling $1.23bn since the strike began on 2 December, Venezuela still has $11.26bn, enough for 10 months of imports.

"We are willing to do anything to defend our reserves and economic stability from speculative attacks and capital flight," said Mr Chavez.

Currency traders have sold off the bolivar this year, sending it tumbling 24% against the dollar until the government suspended trading.

Mr Chavez said oil production, which accounts a third of the economy and half of government revenues, has hit almost 2 million barrels per day, up from 150,000 in December.

Before the strike, the world's fifth largest oil exporter was producing 3.2 million barrels per day.

Sacked workers from state-oil firm Petroleos de Venezuela (PDVSA) claim production is only 1.25 million.

Currency rules

Under the new currency rules, foreign companies have to register with the government before they can repatriate profits overseas, Mr Chavez said.

He also said access to the international currency markets would be restricted for the strikers.

"Not one dollar more to the coup mongers," he said.

The Central Bank and a new regulator will control foreign exchange operations.

Business groups and labour unions joined together to oust the democratically elected Mr Chavez by disrupting the economy, especially the oil sector.

But faced with bankruptcy, many businesses returned to work, breaking with the labour groups, many of whose members have been sacked during the dispute.


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04 Feb 03 | Americas
03 Feb 03 | Business
22 Jan 03 | Business
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