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Imposes controls against strikers { February 6 2003 }

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Chavez Imposes Currency Controls, Warns Foes
As Strike Fades, Emboldened President Takes a Hard Line

By Scott Wilson
Washington Post Foreign Service
Thursday, February 6, 2003; 12:52 PM

CARACAS, Venezuela, Feb. 5—President Hugo Chavez, emboldened as a prolonged general strike against him fades, has put his political opponents on notice in recent days by threatening legal and economic retaliation against those seeking to force him from power.

The most potentially far-reaching step came today when Chavez established a new currency-control system to protect Venezuela’s foreign reserves at a time of deep economic uncertainty in the oil-rich country. The government suspended trading of Venezuela’s national currency, the bolivar, on Jan. 21 as it plummeted in value against the dollar in the midst of an economically devastating general strike.

In lifting the suspension today, Chavez imposed a fixed exchange rate and created a new currency-control board that will decide who receives dollars through an application process. During a speech earlier this week, Chavez pledged that there would not be "a single dollar more for coup plotters," prompting business leaders to warn today that the new system would be used to punish them for their political opposition.

"We have taken steps in time to avoid capital flight," Chavez said in a triumphant national address that began Wednesday night and lasted into this morning. "We have arrived at the ideal solution to defend Venezuela’s economy."

Chavez has emerged over the course of this week invigorated by the failure of general strike designed to force him from power or submit to early elections. Suffering enormous financial loss, Venezuela’s private sector on Monday abandoned the strike that began Dec. 2, prompting Chavez to congratulate his supporters for defeating a diverse opposition movement he refers to as "terrorists" and "coup mongers."

The president’s sense of victory, despite the deep and potentially lasting economic damage done to Venezuela’s fragile economy by the strike, has complicated negotiations to end the political crisis and encouraged a fresh round of street unrest from pro-Chavez mobs. Their targets have been an opposition television channel and the opposition-controlled City Hall, where mobs fired guns and threw rocks in an attack that left five people injured. Neither event brought condemnation from the government.

Although a walkout at the state oil company continues to hamper petroleum production, Chavez has survived the strike with a far stronger hand to remake Venezuela’s most important economic institutions that have long resisted his strident populist program. He has also shown a new recalcitrance in recent days in talks being mediated by Organization of American States Secretary General Cesar Gaviria, despite fresh international pressure to reach an agreement quickly.

"This is a chain reaction," said Felipe Mujica, a congressman from the Movement Toward Socialism party and a member of the opposition umbrella organization known as the Democratic Coordinator. "It’s clear that his goal right now is to intimidate and harass the opposition. He knows the cost to the country has been high, but he is trying to use it now to deepen the conflict and carry out the rest of his project."

Petroleos de Venezuela, the mammoth state oil company that provides the government with nearly half its income, and much of the private sector at large have resisted Chavez’s populist political program since his 1998 election on a pledge to lift up Venezuela’s poor majority. But neither has survived the strike intact, and may never recover from what many opposition critics outside the government say is largely self-inflicted political damage.

In his address, Chavez acknowledged that the government has had to spend $507 million to import unleaded gasoline and diesel fuel since the strike began. But he insisted that the state oil company its well on its way to pre-strike production levels, even though some oil analysts have warned that older equipment in western Venezuela may have sustained permanent damage with the shutdown.

Chavez has fired 5,100 dissident oil-company employees since the strike began, roughly 700 of them managers who participated in a walkout last April that ended in Chavez’s brief ouster in a military-led coup. Chavez announced that production has reached 1.9 million barrels a day, almost two-thirds of its pore-strike capacity. The United States counts on Venezuela for 15 percent of its imported oil.

Since the strike faded, government negotiators have also hardened their position in nearly three-month-old talks being mediated by Gaviria and six "friendly countries," including the United States. Vice President Jose Vicente Rangel, who serves as a government negotiator, dismissed a constitutional amendment that would cut Chavez’s six-year-term to four years. The idea, one of two proposed last month by former President Jimmy Carter to end the crisis, would have allowed general elections early next year.

Opposition negotiators must now focus their attention on a binding referendum, allowed in the 1999 Chavez-inspired constitution, that could be held later this year. Chavez appeared to accept that the referendum could be held as early as August 19, the midpoint of his current term.

But Rangel said this week that the opposition could only begin collecting the required 1.8 million signatures after August 19, infuriating opposition members who say they collected 4 million signatures during rallies across the country on Sunday. The changing government position has renewed opposition fears that Chavez will find a way, perhaps through the high court filled by his appointees, to elude the referendum. It has also irritated even supportive delegates from the friendly nations, most notably Brazil.

Gaviria said the next two days would be spent encouraging the National Assembly and the government to name a new National Electoral Council "that both sides can trust." Both sides agree that establishing a new council as an impartial referee in future elections is the foundation for any accord.

"We are far from an agreement," Gaviria said in a Wednesday news conference.

The currency controls fix the exchange rate at 1,600 bolivars to the dollar, a value 8 percent higher than on the day trading was suspended. Alarming business leaders, the new exchange board will be managed by Edgar Hernandez Behrens, a retired army captain who participated in Chavez’s failed coup against the government 11 years ago.

The government also opened an "administrative" investigation Wednesday against Venevision, the private television station owned by the media magnate and Chavez opponent Gustavo Cisneros. Venevision is the fourth private television station to come under government scrutiny. As the notice was delivered to the station’s headquarters, about 1,000 pro-Chavez protesters arrived in what media owners described as a campaign to intimidate the press.

© 2003 The Washington Post Company

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