Venezuela raids forex businesses, arrests one man

* Chavez declares war on currency “speculators”

* Venezuela awaits new rules for dollar purchases

CARACAS, May 15 (BestGrowthStock) – Venezuelan authorities have
raided four money-changing businesses and arrested one man in
the start of a clampdown on what President Hugo Chavez calls
capitalist speculators distorting the currency market.

The Attorney General’s office said on Saturday that the
businesses were illegally selling dollars in violation of
Venezuela’s currency exchange rules.

The raids came late on Friday shortly after Chavez promised
action to prevent unregulated foreign exchange activities
following the bolivar’s crash against the dollar on a
free-floating “parallel” market. [ID:nLDE64E04U]

The bolivar had weakened about 25 percent to more than 8.0
to the dollar this year on that market, which exists to feed
unmet demand for dollars set by the government at two official
rates of 4.3 and 2.6 for essential items.

Venezuela’s National Assembly voted this week to put that
“parallel” market under supervision of the Central Bank,
essentially paralyzing trade while the institution works on
specific new regulations.

Officials have said the bank will set some sort of range
for the dollar, and a list of “serious” money-changers will be
authorized to do business.

Analysts have warned this strategy may backfire and create
a fourth, illegal market for dollars, and possibly hasten
another devaluation by the government early next year. The
bolivar was devalued from an official rate of 2.15 in January.

The bolivar’s woes are complicating a grim macroeconomic
environment for OPEC member Venezuela which, despite its oil
wealth, has rampant inflation and is expected to be the only
nation in Latin America with economic contraction this year.

Chavez blames inflation — which hit a monthly high of more
than 5 percent in April — and the bolivar’s weakening on
capitalist speculators bent on causing him problems ahead of an
assembly election this year and a presidential vote in 2012.

Many analysts, however, say the socialist president’s
incompetent running of the economy, including heavy state
controls and nationalizations of private business, are to blame
for Venezuela’s poor economic health.
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(Reporting by Andrew Cawthorne; Editing by Xavier Briand)

Venezuela raids forex businesses, arrests one man