[A-List] VENEZUELA: Deflation of 0.7 Percent in March

[Yoshie Furuhashi]

<http://english.eluniversal.com/2007/04/02/en_eco_art_deflation-of-0.7-per_02A851237.shtml>
Deflation of 0.7 percent in March

A 0.7-percent deflation has been recorded in March 2007, below the
1.7-percent inflation rate recorded last February, the Central Bank of
Venezuela (BCV) reported Monday.

In the first quarter of this current year, the indicator stood at 2.6
percent, over 1.3 percent the first quarter in 2006.

The Consumer Price Index (CPI) in March was under the average of 0.46
percent estimated by analysts during a survey conducted by Reuters.

Annualized inflation hit 18.5 percent in March 2007 versus the same
period the prior year, when it amounted to 12.1 percent.

Deflation is just the opposite of inflation. It is a persistent fall
in some generally followed aggregate indicator of price movements.

<http://www.bloomberg.com/apps/news?pid=20601086&sid=a06U44yyxM3M&refer=news>
Venezuela Consumer Prices Unexpectedly Fell in March (Update3)
By Guillermo Parra-Bernal and Theresa Bradley

April 2 (Bloomberg) -- Venezuelan consumer prices had their biggest
monthly decline since at least 1990 in March after the government
slashed the value-added tax on all consumer goods.

Consumer prices fell 0.7 percent last month, the central bank said
today in an e-mailed statement. Only one of 12 economists surveyed by
Bloomberg predicted a drop in prices. In February, prices rose 1.4
percent.

``In the short term, we're going to start to quickly see a decrease in
inflationary pressures,'' Armando Leon, a central bank director, told
reporters in Caracas today. He predicted inflation will continue to
slow during the second quarter.

The government cut the value-added tax rate to 11 percent from 14
percent on March 1 to help ease a surge in consumer prices triggered
by shortages of goods from foodstuffs to car parts. Economists such as
Tania Reif of Citigroup Inc. said the effect of the tax reduction will
be temporary and that a growing economy and restrictions on foreign
exchange trading may push up inflation again in a few months.

Inflation for the 12 months through March slowed to 18.5 percent from
20.4 percent in February, compared with the 20.1 percent median
estimate in the survey. Venezuela, where inflation has topped 10
percent a year since 1986, has the fastest pace of consumer price
increases in Latin America.

``The behavior of the price index reflects the impact of the series of
tax measures taken by the government last month, as well as recent
adjustment in some regulated prices and the substantial improvement in
the supply'' of certain consumer goods, the central bank said the
statement.

Chavez

President Hugo Chavez said tonight in Caracas that a plan to
redenominate the currency may consolidate gains in the fight against
inflation. The government will lop off three zeros from the bolivar
and launch the ``bolivar fuerte'' by the start of 2008, as part of a
plan to boost purchasing power in the oil-rich nation.

The inflation result ``deserves some applause in recognition of the
integrated anti-inflation policies we've had,'' he said.

Food prices fell 4.7 percent in March, the bank said.
Telecommunications prices, including cell phone fares, dropped 2.6
percent and the cost of transportation fell 0.3 percent.

The currency remained unchanged in parallel, unregulated trading. The
bolivar stood at 3,650 per dollar from Friday, traders said.

Under restrictions that President Hugo Chavez imposed in February
2003, foreign-currency trading outside the government channel is
prohibited. The government is the only entity authorized to buy and
sell currency with individuals, companies and banks.

To contact the reporters on this story: Guillermo Parra-Bernal in
Caracas at gparra at bloomberg.net
Last Updated: April 2, 2007 18:18 EDT
--
Yoshie