By Jose Orozco and Matthew Walter
Venezuelan President Hugo Chavez said he may adjust the country's currency controls, opening the door for the first devaluation of the bolivar since 2005.
The government won't do away with its foreign exchange controls, which are necessary to prevent capital flight, Chavez said today in comments broadcast by state television.
``We could make them more flexible, but they're here to stay,'' he said before tens of thousands of supporters gathered outside the presidential palace to commemorate his return to power after a brief 2002 coup.
Venezuela, which has pegged the bolivar at 2.15 per dollar since 2005, has sold dollar-denominated bonds in the local market on a weekly basis this year in a bid to meet increased demand for foreign currency. Finance Minister Rafael Isea said April 2 the government will sell dollar bonds later this month directly to importers.
Chavez also called on lawmakers to approve a new ``sudden gains'' tax on oil production, which he said is needed to finance more social spending. Venezuela's National Assembly decided to delay a vote on whether to approve the tax on April 10.
The tax, which kicks in when crude oil prices rise to more than $70 a barrel, would earn the government a minimum of $500 million a month, Chavez said. Half the tax revenue would go to a new social program to provide water, electricity, public safety and food distribution to the poor, the president said.
Nationalization Program
Some of the funds raised by the tax would help pay for the nationalization of Luxembourg-based Ternium SA's local steelmaking unit and the Venezuelan subsidiaries of three multinational cement companies, Chavez said. The government announced the takeovers earlier this month.
``This approval of this tax is urgent,'' Chavez said.
After losing a December referendum on rewriting the constitution, and with state and municipal elections due in November, Chavez said he is seeking to ``re-energize'' his so- called Bolivarian revolution.
The president warned that anyone aspiring to join his proposed United Socialist Party of Venezuela who tries to start their own independent campaign will be banned from the party.
``We must assure a great victory in the elections for governors and mayors,'' the president said.
To contact the reporter on this story:
Jose Orozco in Caracas at jorozco8@bloomberg.net;
Matthew Walter in Caracas at mwalter4@bloomberg.net.
