Venezuela gov't expands right to use profits of central bank

["Fred Feldman" <ffeldman@xxxxxxxxxxxxxxxx>]

Venezuela acts to grab central bank profits faster
Reuters, 10.17.02, 5:48 PM ET

CARACAS, Venezuela, Oct 17 (Reuters) - Venezuela's National
Assembly on Thursday approved a change to the country's
central bank legislation which will let the government seize
the bank's foreign exchange profits every six months,
instead of annually as was previously the case.

The new law, drawn up by pro-government deputies who hold a
slim majority in the parliament, will allow President Hugo
Chavez's administration to benefit from central bank profits
this year, at a time when it is facing financing problems.

Opposition deputies criticized the change in the Central
Bank law, saying it violated constitutional principles which
prohibited the government from financing deficit shortfalls.

"The basic aim of the reform ... is to get hold of the
foreign exchange profits to use them to help solve the
problem of the fiscal deficit," Salomon Centeno of the
opposition Democratic Action party said.

The Venezuelan Central Bank (BCV), which sells dollars in
daily foreign exchange auctions, has earned hefty profits
this year as a result of a sharp depreciation of the local
bolivar currency against the U.S. dollar.

The bolivar, which was floated by the government in
mid-February, has lost 45 percent of its value against the
dollar since the start of the year.

Private economists estimate the BCV's foreign exchange
profits so far this year have reached at least 4 trillion
bolivars.

This would be equivalent to around $3.6 billion, calculated
using the bolivar's average exchange rate so far this year
of 1,100 bolivars to the dollar.

Chavez's government, which survived a short-lived coup by
rebel military officers in April and faces a national strike
called by the opposition for Monday, has financing
requirements this year of around $4 billion.

Chavez, a left-wing former paratrooper who was elected in
1998 six years after he staged a botched coup bid himself,
is refusing opposition demands for him to resign and call ea
rly elections.

Copyright 2002, Reuters News Service






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