Top Financial News 02/06 00:22 Venezuela Fixes Bolivar 17 Percent Stronger (Update1) By Alex Kennedy
Caracas, Feb. 5 (Bloomberg) -- Venezuela fixed the bolivar at a rate 17 percent stronger than it last traded to protect foreign currency reserves after a two-month national strike crippled the economy and spurred demand for dollars. President Hugo Chavez said the bolivar will be set at 1,598 to the dollar, 13 percent weaker from the end of last year. The central bank will limit sales of the U.S. currency and payments for dollar debt and imports of food and medicine will have priority, he said. "We are willing to do anything to defend our reserves and economic stability from speculative attacks and capital flight," Chavez said in a speech on national television. A two-week ban on currency trading also will end, he said. The currency restrictions may force many Venezuelan trading companies out of business, spur corruption and fuel demand for the U.S. currency on the black market, where dollars already are selling for about 2,500 bolivars, analysts said. Samsung Electronic Co., the world's largest maker of computer memory chips, said its Venezuelan distributors had halted orders ahead of the expected currency limits, while Siderurgica Venezolana Sivensa, the nation's second-largest steelmaker, said it was concerned the government will seize its export revenue and make it more difficult to meet payments on more than $200 million of foreign currency debt. The strike, which was aimed at deposing Chavez and collapsed this week, already had throttled most business activity in the country and prompted some analysts to forecast the economy may contract as much as 25 percent this year. With the added currency restrictions, "we are going to see a country going into paralysis," said Carlos Fernandez, who heads the country's largest business organization. Chavez also said Venezuela has boosted oil output to 1.9 million barrels a day from 150,000 barrels a day in December, Chavez said. The country produced about 3.2 million barrels a day before a 62-day strike began Dec. 2.
