CARACAS (Reuters) – Venezuelan President Hugo Chavez is promising tough measures against “bourgeois” speculators whom he blames for the OPEC member nation’s runaway inflation and ever-weaker bolivar currency.
“We need to stop this right now. The bourgeoisie do not listen to appeals to their conscience. Let’s act with a firm hand,” the fiery socialist told his Cabinet late yesterday, in a familiar response to times of economic difficulty.
“We need to smash speculation.”
Already in recession and forecast to be the only nation in Latin America with negative growth in 2010, Venezuela’s economy had more bad news this week with the highest monthly inflation, 5.2 per cent, in years.
Fuelling the price rises and causing distortions throughout the economy, the US dollar touched 8.0 bolivars on the free-floating parallel market. That was nearly double the main official rate of 4.3 bolivars and triple the government’s 2.6 level for essential imports.
Chavez, who calls himself a Marxist and has made a political career out of attacking Venezuela’s traditional elite, said his economic team and intelligence services would give him a list of speculators and hoarders by today.
Then short-term and medium-term measures would be announced, he said.
Dozens of butchers were arrested last week, accused of hiking their prices illegally.
Chavez accused the rich of taking advantage of a recent rise in the minimum wage and also seeking to cause him problems before a September legislative election.
“I warn them: we are not going to be pushed around,” he said. “We make an effort to raise salaries… then immediately the capitalists raise everything, food, transport, clothes. They’re trying to cause problems and we won’t allow it.”
Venezuela’s April inflation spike appears to be a delayed reaction to the impact of a January devaluation.
Stern warnings against retailers and the nationalization of a supermarket chain on price-gouging charges chilled price rises in the first two months after the devaluation.
Wall Street analysts say Chavez’s incompetent handling of the economy — rather than unscrupulous speculations — is to blame, with incoherent monetary policies and an anti-business environment that has crushed productivity and investment.
“Inflation pressures are likely to remain high and the risk of a currency crisis is rising by the day,” said Goldman Sachs analyst Alberto Ramos, adding that Venezuela was now under growing pressure to issue more debt despite official denials.
Chavez also lambasted speculation on the free-floating, or parallel, currency market, saying state currency board CADIVI was releasing billions of dollars at the official rates.
Businessmen say, however, that access to dollars at 4.3 or 2.6 bolivars is severely restricted — and rife with corruption — meaning about half of imports rely on obtaining foreign currency on the parallel market.
The Central Bank’s issuance of more than $450 million in so-called “exchange bonds” since January has failed in its stated aim of strengthening the bolivar’s parallel rate.
“Even if you, Nelson, burn all the international reserves, we won’t get the parallel dollar down,” Chavez told his Central Bank President Nelson Merentes.
“Because the bourgeoisie and those in charge of the trading houses, the private banks and so on, they know everything, they’ve been involved in this all their lives, they have international connections.”
Speculation of impending government measures to control the parallel market, and visits by officials to some trading houses last week, were a factor in strengthening the dollar further to its record level on Thursday and Friday.
Chavez, who has cast himself as Latin America’s heir to Cuba’s Fidel Castro as the main critic of Washington-led “imperialism,” said capitalism was bringing down Europe and the United States “but here we have to stop it in time.”