Global Policy Forum

By Christopher Toothaker

Jewelry, crystals and gold-encrusted statues usually fill Luis Pereida's gift shop in central Caracas. But his suppliers have not brought him a shipment in three months, and the store's stock is dwindling. The problem is a package of currency controls that President Hugo Chavez imposed on Jan. 21 to try to stop the free fall of Venezuela's currency, the bolivar. The rules restrict buying of dollars - and without dollars, distributors who supply Pereida cannot buy goods from abroad.

The shortage is beginning to hit business owners hard, and Pereida, for one, is worried. "If this situation continues, I'll have to close my store," he said.

To try to cushion the blow for importers, the government exchange controls committee, or Cadivi, has declared about 6,000 goods as essential - including some food products, medicines, hygiene items and industrial raw materials. Importers of those goods, under the new regulations, will eventually be granted dollars. But as a result of delays in implementing the new system, not one dollar has been granted during the last 57 days. The delay has prompted confusion and anxiety in many shop owners.

Some are buying dollars on the black market. The bolivar has a fixed rate of 1,598 to the dollar but trades as high as 2,800 on the black market. The president of the currency committee, Edgar Hernandez, said Monday that the government would begin granting dollars this week.

The committee is supposed to sell $650 million this month, but economic analysts said only a small fraction of it would go to the private sector for imports. "This isn't enough," said Jose Pineda, chief economist at VenAmCham, the Venezuelan American Chamber of Commerce and Industry. Importers need at least $800 million a month, he said.

Pineda said that only the government was importing goods. To combat food shortages caused by the lack of available dollars, the government is importing food and using the military to distribute and sell it at markets for the poor. Pineda estimates that the government could use $400 million of the $650 million that the exchange controls committee is scheduled to grant in March, leaving the rest for importers, students abroad and people on business trips.

Imports averaged about $1 billion a month last year and are expected to fall by roughly half that amount because of the new rules.

Opposition leaders, who blame Chavez's left-leaning policies for the country's deepening economic crisis, are demanding that he agree to early elections. Chavez has blamed his adversaries for the economic downturn. Amid the turmoil, Fedecamaras, the leading Venezuelan business chamber, said Monday that at least 30,000 businesses could fold this year.

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