[R-G] Venezuela to Act against Inflation

[Yoshie Furuhashi]

<http://www.businessweek.com/ap/financialnews/D8Q7DD1G0.htm>
The Associated Press  July 6, 2007, 7:54PM ET
Venezuela to act against inflation

CARACAS, Venezuela

Venezuela has begun to slow public spending and plans to issue some
$2.8 billion in bonds and treasury notes by the end of the year as it
seeks to counter inflation, the country's finance minister said
Friday.

Finance Minister Rodrigo Cabezas told Dow Jones Newswires in an
interview that the idea is to gradually moderate spending while
monitoring the economy's response.

"We're talking about a policy of fiscal responsibility," he said, but
declined to quantify the spending slowdown. The government moves won't
amount to a radical spending cut to "sacrifice production at the altar
of an inflationary battle," Cabezas said.

Inflation has become a major headache for President Hugo Chavez, who
has promised to protect the purchasing power of Venezuelan families.
Last year saw 17 percent inflation, but this year Cabezas said the
government expects to bring inflation below that level.

He said 12 percent inflation remains the 2007 goal but that "it will
be very difficult to reach." He said for Venezuela a 14 percent level
is sustainable and manageable.

Venezuela's economy, boosted by high oil prices, has seen strong
growth. Cabezas predicted the economy will grow at least 8 percent
this year. He said even with the spending slowdown, the fiscal deficit
should end the year at 2 percent of gross domestic product.

As for Venezuela's currency, he said devaluing the bolivar is not an
option anytime soon. Venezuela has had a fixed exchange rate since
2003, when Chavez imposed currency and price controls in an attempt to
bring stability to the economy.

In the four years since, the Central Bank has devalued the bolivar
twice. The rate has been fixed since early 2005 at 2,150 bolivars to
one U.S. dollar. The unofficial rate on the black market, however, has
edged above 4,000 bolivars to the dollar in recent weeks.

--
Yoshie