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Caracas. Opposition leaders criticized President Hugo Chavez’s decision to devalue the Venezuelan currency, saying it was a thinly veiled effort to generate more spending ahead of congressional elections.

Chavez announced the devaluation — the first in nearly five years — late last week, in a bid to multiply government income from oil sales to counter a recession. “Venezuelans’ standard of living has been devalued,” said Antonio Ledezma, Caracas’ opposition mayor. Finance Minister Ali Rodriguez acknowledged that the devaluation would increase already soaring inflation — already Latin America’s highest at 25 percent — by 3 percent to 5 percent this year. Some economists predict a much bigger leap.

With the devaluation, Chavez set a new two-tiered exchange rate designed to help the government’s oil earnings go further domestically while holding down prices of priority imports.

The currency’s official exchange rate had been held steady by the government at 2.15 bolivars to the dollar since the last devaluation in March 2005. Chavez said the bolivar would now have two government-set rates: 2.60 to the dollar for transactions deemed priorities by the government, and 4.30 to the dollar for other transactions. The higher rate, which he called the “oil dollar,” instantly doubles the paper value of Venezuela’s oil earnings when converted to local currency. Oil accounts for about half the government budget, but that income has been squeezed by lower oil prices and declines in output in the last year.

Chavez said the priority exchange rate would be allotted for food, health care products, school supplies, machinery and equipment for economic development, among other things. He added that the new rates aimed to boost the economy — which fell into a recession last year after five years of oil-fueled growth — while also “braking imports that are not strictly necessary.”

Imports now falling under the less favorable rate include cars, electronic goods, computers, alcohol and tobacco.

Dozens of Venezuelans lined up outside electronics stores on this weekend trying to buy appliances that they fear will soon be considerably more expensive.

“When I heard about the dollar, I didn’t think twice about it. I got some of the last cash out of my account and I came to buy my washing machine,” said Iraima Rodriguez, a secretary.



Associated Press