MercoPress. South Atlantic News Agency

Chavez trying to prevent speculation with US dollars

The Bolivar is rapidly loosing value as inflation eats into consumers’ pockets

Venezuelan President Hugo Chavez signed Sunday a currency law passed by the National Assembly this week that seeks to stem a decline in the local currency Bolívar, according to a broadcast on state television.

“This law creates an alternative system,” Chavez said on state television. “I don’t mind more regulation if it’s needed. Don’t provoke me, bourgeois speculators and brokerages.”

The law hands control of the parallel currency market to the central bank which will now choose the brokerages and private banks that can trade dollars.

Chavez, who devalued the currency by as much as 50% in January and created a tiered exchange system, last week called for a “strong hand” against speculation in the unregulated market. Chavez made the call after consumer prices surged the most in seven years last month.

Finance Minister Jorge Giordani, Vice President Elias Jaua and Nelson Merentes, president of the central bank, are scheduled to a press conference Monday to explain the law’s reach, Chavez said.

Venezuelans turn to the parallel market when they can’t get government approval to buy US dollars at the official rate of between 2.6 and 4.3 Bolivar per dollar.

The Bolivar plunged to a record low in the parallel market this week, falling to 8.2 per dollar on May 11 amid a surge in the demand for the US currency. The currency has declined 26% against the US dollar this year, while inflation is believed to be soaring at an annual 40%.