MercoPress. South Atlantic News Agency

Oil prices threaten Chavez constitution reform process

Venezuela's National Assembly has given preliminary approval for a constitutional referendum to scrap presidential term limits, which would allow President Hugo Chavez to run for re-election in 2012 and beyond.

Election officials said the referendum on the constitutional amendment could be held in March if the lawmakers give their approval on the second reading of the draft amendment in January. Government officials said President Chavez supporters collected nearly five million signatures to symbolically support the amendment sought by the populist leader. Last year, Venezuelans narrowly rejected a broad package of constitutional amendments that among other issues lifted term limits for the presidency. Under the existing law in Venezuela, a president is elected for 6 years, and can only be re-elected once President Chavez has asked voters to change Venezuela's constitution to move the country toward what he called 21st century Socialism. However opposition parties say the president's re-election proposals are "anti-democratic, unconstitutional and against the national interest". The opposition and in particular many of the country's students are gearing themselves up for a repeat of last year's campaign. But in spite of the optimism of the National Assembly packed with pro-Chavez supporters the Venezuelan economy, after the plunge in oil prices is playing a different tune and the local currency Bolivar, could experience a devaluation, but after the first quarter of 2009. A more immediate decision is to reduce dollar sales at the official exchange rate in a bid to save hard currency. Finance Minister Ali Rodriguez said Venezuela will likely cut dollars sold to citizens for international travel. Under exchange controls imposed in 2003, Venezuelans can only obtain dollars at the official exchange rate from the government. "We're taking a series of steps with the goal of providing the maximum security possible for dollar liquidity, given the current situation," Rodriguez said. It's "very likely" that dollar sales for travel will be reduced, he said. Venezuelan oil sales account for more than 90% of the country's export revenue and 50% of the government's budget. Rodriguez has said spending cuts probably won't come until after the first quarter of next year following the referendum on President Chavez proposal to eliminate his term limits. Between 2004 and 2007 Chavez increased the budget 120% and in addition ordered state oil company Petroleos de Venezuela SA, PDVSA, to directly finance social programs as part of his socialist "revolution." The government-run Foreign Exchange Administration Commission, which trades currency at the official rate, offers to sell up to 5,000 USD to each citizen a year for travel abroad, under current rules. "The Venezuelan government can't rule out a devaluation of the official exchange rate next year, even as one isn't planned", Rodriguez said. The exchange rate has been pegged at 2.15 Bolivares per dollar since 2005. In the parallel, unregulated currency market, where Venezuelans turn when they can't get permission to buy dollars at the official rate, the currency fell 7.1% to 5.30 per dollar today, traders said. The annual inflation rate this year is likely to be 30% and the economy will grow less than the 6% forecast used to calculate the 2008 budget, Rodriguez said.