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Venezuela raids forex businesses, arrests one man

16 May 2010 04:46 (UTC +04:00)

Baku-APA. Venezuelan authorities have raided four money-changing businesses and arrested one man in the start of a clampdown on what President Hugo Chavez calls capitalist speculators distorting the currency market, APA reports quoting Reuters.
The Attorney General’s office said on Saturday that the businesses were illegally selling dollars in violation of Venezuela’s currency exchange rules.
The raids came late on Friday shortly after Chavez promised action to prevent unregulated foreign exchange activities following the bolivar’s crash against the dollar on a free-floating "parallel" market.
The bolivar had weakened about 25 percent to more than 8.0 to the dollar this year on that market, which exists to feed unmet demand for dollars set by the government at two official rates of 4.3 and 2.6 for essential items.
Venezuela’s National Assembly voted this week to put that "parallel" market under supervision of the Central Bank, essentially paralyzing trade while the institution works on specific new regulations.
Officials have said the bank will set some sort of range for the dollar, and a list of "serious" money-changers will be authorized to do business.
Analysts have warned this strategy may backfire and create a fourth, illegal market for dollars, and possibly hasten another devaluation by the government early next year. The bolivar was devalued from an official rate of 2.15 in January.
The bolivar’s woes are complicating a grim macroeconomic environment for OPEC member Venezuela which, despite its oil wealth, has rampant inflation and is expected to be the only nation in Latin America with economic contraction this year.
Chavez blames inflation -- which hit a monthly high of more than 5 percent in April -- and the bolivar’s weakening on capitalist speculators bent on causing him problems ahead of an assembly election this year and a presidential vote in 2012.
Many analysts, however, say the socialist president’s incompetent running of the economy, including heavy state controls and nationalizations of private business, are to blame for Venezuela’s poor economic health.