MercoPress. South Atlantic News Agency

Venezuela slashes US dollar quota

Hugo Chavez's government is also faced with rising inflation

The Venezuelan government has cut the official number of dollars Venezuelans can spend abroad with their credit cards from $5,000 to $2,500 a year.

The measure aims to preserve foreign currency reserves amid the global economic crisis and Venezuela's own declining oil revenues. It tightens restrictions in place since a prolonged oil strike in 2003. Further economic announcements are expected from President Hugo Chavez in the first part of 2009. The new measure means Venezuelans going abroad can only count on a maximum of $2,500 dollars a year, down from $5,000, on their credit cards. The cash sum travellers can have also been reduced from $600 to $500 a year. It also sets new limits for cash withdrawals in dollars from $400 to $250 a month. If they want more, they will have to buy dollars on the black market which operates at more than twice the fixed exchange rate of 2.15 bolivars to the dollar. Under the new rules, credit card holders will only have access to dollars from the Commission of Foreign Exchange Administration (Cadivi) once they have had their cards for six months. Economists in Venezuela predict that this will be the first of a series of measures to be announced in January, aimed at preventing capital flight in reaction to the global economic crisis and the current low oil prices. President Chavez has said that his popular social programmes will be funded irrespective of the price of oil, but the opposition say that he will be forced to take serious measures unless the price recovers from around $40 a barrel soon. Those measures could include cuts on public spending, particularly major infrastructural projects, or even a currency devaluation, says the BBC's Will Grant in Caracas. Mr Chavez recently announced a plan to double production in non-oil sectors of the economy, such as gold, steel and cement, to try to move the economic base away from its heavy dependence on oil. (BBC)