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Venezuela devalues currency by 32%

Section: Daily Dispatches

By Eyanir Chinea
Friday, February 8, 2013

CARACAS -- Venezuela devalued its bolivar currency to 6.3 per dollar from 4.3 per dollar, the finance minister said today, in a widely expected move to shore up government finances after blowout government spending last year.

The measure will help ease a shortage of dollars that has crimped imports and left many supermarkets barren of staples such as flour or sugar. It is also seen pushing up consumer prices in the import-dependent OPEC nation that already has one of Latin America's highest inflation rates.

Venezuela has maintained exchange controls on the bolivar for a decade under which importers and travelers must seek dollars through a state currency board, or buy them on an illegal black market where greenbacks fetch nearly four times the official rate.

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Central Bank President Nelson Merentes said on Friday the government was also eliminating a currency exchange system known as SITME, which functioned via bond swaps in parallel with the state currency control board.

The currency adjustment follows two months of silence from socialist President Hugo Chavez, who is in Havana and has not been seen in two months since a complex cancer surgery.

The inflationary impact over the coming months could dent Chavez's popularity at a time of ongoing uncertainty over whether his cancer will prevent him completing a third term in office.

The central bank said on Friday that consumer prices rose 3.3 percent in January, the country's second-highest rate since 2010, while product shortages reached their highest in close to five years.

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