Venezuelan president agrees to relax controls

Source: Associated Press

President Hugo Chavez rejected calls for an end to strict exchange controls but said the rules could be made more flexible to ease access to U.S. dollars.

"We always said we would make the exchange controls more flexible," Chavez said Sunday.

"In no moment are we thinking of eliminating them ... but we are loosening them," he added.

Chavez did not specify how the controls would be eased.

Chavez's administration imposed controls on buying and selling of foreign currency in January during a two-month strike called to force Chavez from power. The controls stopped a slide of foreign reserves and the bolivar currency and during the strike, which cost Venezuela an estimated US$7.5 billion.

Last month, the Central Bank sold US$210 million - a fraction of Venezuela's usual dollar demand of US$1 billion a month. Venezuela imports about 60 percent of its goods.

Critics accuse the government of using the controls as a political tool to deny dollars to opponents. The government denies the claims, countering that few companies have met the necessary requirements to apply for dollars.

Many businesses that depend on dollars for imported goods have resorted to buying dollars on the black market at a rate 50 percent higher than the official fixed rate of 1,600 bolivars to the dollar.

Italcambio, the company that controls 86 percent of Venezuela's foreign exchange market, warned it may close by the end of the year if the foreign exchange system is not lifted or eased.

The government recently decided to transfer the power to decide who gets dollars and how much from a special commission to the finance ministry.

The commission is now only in charge of processing the transactions.

The finance ministry hopes to increase daily dollar releases to around US$45 million in coming weeks.