Venezuela lawmakers give Central Bank control of bond trading, hoping to stem currency slide

Pro-Chavez lawmakers tighten currency controls

CARACAS, Venezuela — Lawmakers voted Thursday to tighten currency dealing rules and give the Central Bank control over trading in government bonds — a market where Venezuela’s currency has been sliding against the U.S. dollar.

Dominated by legislators loyal to President Hugo Chavez, the National Assembly gave near unanimous approval to a bill that bars private brokerages from operating in the “parallel” dollar market through bond trading.

The legislation is aimed at slowing the rapidly falling value of Venezuela’s currency — the bolivar — against the U.S. dollar in that “parallel” market in hopes of curbing worsening inflation and reducing capital flight.

“We cannot allow businessmen and brokerages to take money out of the country and exchange it abroad for their own benefit,” said congressman Ricardo Sanguino, president of the National Assembly’s Finance Committee.

The bill must be signed by the president before it becomes law.

Chavez’s socialist government has implemented currency controls that set fixed, official rates for the trading of bolivars and U.S. dollars.

The state-run currency agency provides some dollars for approved imports such as food at the official rate, but a black-market trade is also flourishing, and many businesses have turned to legal bond transactions to trade currency.

The value of the dollar on the black market and in the bond market has increased in recent weeks to about 8.20 bolivars to the dollar — almost twice the official rate of 4.30 bolivars to the dollar for nonessential goods.

The price of dollars on the black market heavily influences inflation. Last week, the Central Bank and National Statistics Institute said consumer prices jumped 5.2 percent in April alone, driving the annual inflation rate to 30.4 percent.

In a televised speech, Chavez accused wealthy businessmen allied with Venezuela’s opposition of using currency speculation to cause economic woes as part of a broader plan for hurting the government’s popularity ahead of congressional elections in September.

“There’s an economic conspiracy against the revolution to boost inflation, increase shortages and malaise among the people,” he said.

Chavez said he has information some businessmen are illegally bringing U.S. dollars into Venezuela. Police and prosecutors are investigating reports one local company imported mattresses that were filled with greenbacks, he said.

Victor Olivo, an economic professor and former Central Bank manager, said the law approved Thursday won’t put an end to black market trading and he warned that it could push inflation higher.

“More and more control is going to increasingly aggravate the situation,” Olivo said.

Opposition politician Henrique Salas condemned the new legislation while criticizing the government’s socialist-orientated economic policies, saying oil-rich Venezuela should be in better shape.

“The country’s economy is in bad shape,” Salas told the local Venevision television channel, noting that some analysts estimate inflation could reach 35 percent by the end of the year.

Venezuela’s economy shrank 3.3 percent last year.

Associated Press Writer Christopher Toothaker contributed to this report.