Chavez orders shops to shut to stop price rises
Soldiers closed dozens of shops in Venezuela today trying to prevent price rises after the country devalued its currency.
Government officials began inspecting retailers a day after President Hugo Chavez threatened to temporarily close or take over businesses that raised prices as a result of the devaluation he announced on Friday.
Venezuelans crowded into stores selling electronics and appliances for a third straight day, trying to buy items before prices jump.
The government had held the bolivar at an official rate of 2.15 to the dollar since a devaluation in March 2005.
Mr Chavez set a new two-tiered exchange rate on Friday, pegging the bolivar at 2.6 to the dollar for priority goods such as food and medicine and 4.3 per dollar for imports of non-essential products such as air conditioners and electronics.
The president argued the change will discourage imports and encourage domestic production of items such as food and clothing.
Oil-rich Venezuela imports most of the products it uses, and most shoppers are expecting prices to soar.
Critics have called Mr Chavez’s threats against businesses a futile attempt to prevent the devaluation from pushing up inflation, which at 25 percent is already the highest in Latin America.
Domingo Maza, a former director of the central bank, predicted the devaluation could push inflation as high as 50 percent this year. He said he does not expect the measure to boost exports as the government hopes.
The devaluation is also affecting some foreign companies, which saw their shares fall as investors worried about how their businesses might be hurt.
Patrick Esteruelas, a Latin America analyst at the New York-based Eurasia Group, predicted that multinationals involved in the consumer goods industry in Venezuela “are going to fare really badly out of this.”
He said the devaluation will strengthen Venezuela’s ability and willingness to pay its foreign debt.
He also said that oil companies working in Venezuela “will fare reasonably well” because their sales are in dollars and that oil service contractors will probably also find it easier to collect on unpaid debts owed by the government.
