[NYTr] Venezuela Launches New Currency, the "Strong Bolivar"

[All the News That Doesn't Fit]

Prensa Latina, Havana
http://www.plenglish.com

Venezuela Beefs Up Bolivar

# Caracas, Jan 2 (Prensa Latina) After New Year festivities, Venezuelan
financial institutions open doors on Wednesday with a family of six
bills and seven coins, resulting after the elimination of three zeros
to the Bolivar, as part of the monetary reconversion process in the
country.

The new currency officially began circulating on January 1, when
electronic transaction systems, cash dispensers, and balances of
accounts underwent final adjustments.

According to the Central Bank of Venezuela (BCV), the initial result
has been positive, after several months of preparations that included
an intensive information campaign nationwide.

The BCV board of directors recalled there will be a transitional period
of at least six months to guarantee that the exchange process develops
efficiently.

The new money facilitates count operations, and establishes an exchange
rate of 2.15 strong Bolivars per each US dollar.

hr dig mem mf PL-7

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Prensa Latina, Havana
http://www.plenglish.com

Strong Bolivar Will Not Impede Trade with Colombia

Bogota, Jan 2 (Prensa Latina) The entry of the strong bolivar as the
national currency in Venezuela with the beginning of the year 2008 will
not be an inconvenience for trade with Colombia, Venezuelan
entrepreneurs assured in this capital.

Javier Diaz, president of the National Exporters Association (ANALDEX),
said that the introduction of the strong bolivar with three zeros less
is of a psychological effect on the Venezuelan economy, which has
received a strong inflation.

Diaz made statements to radio station Radio Caracol and said that in
practice, the monetary conversion remains the same, so there will not
be any effect on the bilateral trade.

The bilateral trade went over 5 billion dollars in 2007.

Diaz said that in bordering zones with important exchanging power, just
like the city of Cucuta, in the Colombian department of Norte de
Santander, there may be any confusion at the beginning, but at the end,
it will be very positive.

Implantation of the strong bolivar in Venezuela started on January 1st,
2008, and will finish in six months, when all the old Venezuelan
bolivar bills are taken out from circulation.

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Venezuela Information Office (VIO)
http://www.rethinkvenezuela.com

excerpted from VIO Venezuela Daily News Roundup - Jan 2, 2007

[In economiic news, Reuters reports that Venezuela's economy
grew 8.4% in 2007, while efforts to cut inflation and build economic
security marked the beginning of the new year.  Venezuela's Central
Bank stated that although the oil sector had shrunk by 5.3% last year,
it had grown by 9.7% in the non-oil sector. The public sector grew
15.7% in 2007, while the private sector, which represents more than
half of Venezuela's gross domestic product, grew 8.2 percent.  Both
Reuters and the Financial Times debate Venezuela's new currency and its
goal of stemming inflation, but only Reuters gives an equal amount of
coverage to those in favor of the government sponsored measure.-VIO]    


Financial Times - January 2, 2008
http://www.ft.com/cms/s/0/00293702-b8d4-11dc-893b-0000779fd2ac.html 

Venezuela Launches New Currency to Stem Inflation

By Benedict Mander in Caracas

In an effort to stem record-high inflation, Venezuela launches a new
currency today - the "strong bolivar" - by slicing three zeroes off the
bolivar.

While President Hugo Chávez's government is hailing the measure as an
anti-inflationary measure that will help stabilise the economy,
non-government economists fear the strong bolivar will be anything but
strong.

"We're ending a historical cycle of . . . instability in prices,"
Rodrigo Cabezas, finance minister, said on Monday, adding that the
change aimed to "recover a bolivar that has significant buying
capacity".

"It was necessary to leave behind the consequences of a history of high
inflation," Gaston Parra, central bank president, said in a televised
year-end speech. He added that officials aimed "to reinforce confidence
in the monetary symbol".

However, in view of racing inflation, an increasingly unsustainable
exchange rate and shortages of basic goods, José Guerra, a former chief
economist at Venezuela's central bank, said: "The monetary
'reconversion' is not going to stabilise prices. It's not going to help
reduce inflation, or anything of the kind," arguing that the new
currency could even trigger higher inflation. "It's a dangerous move,"
he said.

In 2007 inflation in Venezuela is expected to exceed 20 per cent, the
highest in the region - far beyond the government's target of 12 per
cent.

"There will be confusion," said Domingo Maza Zavala, whose term as a
director of the central bank ended early in 2007. He argues that
government campaigns proclaiming the advent of "a strong bolivar, a
strong economy, a strong country" - have created the false impression
the new currency will have a greater purchasing power than the old one.

"The strong bolivar is being born into an environment not only of
monetary instability, but also ex-change rate, financial, economic and
social instability. That is not the best climate for its success," he
said.

Although the strong bolivar will bring some benefits such as
simplifying transactions and accounts, the cost of introducing it -
updating computer systems, for example - has been greater than
expected, and may lead companies to round up prices to cover costs.

Economists argue that currency reforms have only been successful when
inflation is already under control.

Mr Maza Zavala said the currency reconversion should be accompanied by
additional anti-inflationary policy, in particular ensuring the
availability of popular goods, especially basic foods, as well as
moderating government spending.

Imbalances in the exchange rate regime also threaten the new currency.

José Manuel Puente, an economist at the IESA business school in
Caracas, says the exchange rate is at least 20-30 per cent overvalued.
[...]

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Reuters - January 1, 2008
http://www.reuters.com/article/bondsNews/idUSN0160996920080101

Venezuela Cuts Three Zeros Off Bolivar Currency

CARACAS, Jan 1 (Reuters) - Venezuela opened the New Year on Tuesday by
revamping its bolivar currency in an effort by the government of
President Hugo Chavez to tackle the highest inflation in the Western
Hemisphere.

The bolivar's official exchange rate is now 2.15 bolivars per dollar,
compared with the previous official rate of 2,150 per dollar. The
change does not constitute a devaluation since the prices of goods in
bolivars are expected to be reduced by the same amount.

Supporters said the move will make accounting easier and tame inflation
of 20.7 percent in the 12 months to November, though critics call it a
cosmetic change that does not address the underlying causes of the OPEC
nation's price instability.

"It will give us favorable expectations ... in the battle that all
Venezuelans must wage to control inflation, to strengthen our
currency," said Finance Minister Rodrigo Cabezas in an interview with
state television on the eve of the change.

Economists said the monetary conversion will cause confusion and even
fuel inflation as a result of rounding, and say the government must
reduce burgeoning monetary liquidity and slow spending of record oil
revenue to control consumer prices.

Government leaders say the measure will have a positive psychological
effect on consumers by demonstrating the strength of the bolivar.

Venezuela's 2006 inflation was 17 percent, and reached 18.6 between
January and November of 2007.

The finance ministry said new bills would be available in some
businesses and cash machines on Tuesday. The government will slowly
phase out the old bills and coins over the coming months. 

                             ***

Reuters - December 30, 2007
http://www.reuters.com/article/oilRpt/idUSN3053207320071230


Venezuela Economy Grew 8.4 pct in 2007-Central Bank

CARACAS, Dec 30 (Reuters) - Venezuela's economy expanded 8.4 percent in
2007 despite a contraction in the oil sector, the backbone of the South
American nation's economy, the central bank said on Sunday.

The bank said the oil sector had shrunk 5.3 percent in the year, but
9.7 percent growth in non-oil parts of the economy had compensated.

In its end-of-year statement, the bank said the public sector grew 15.7
percent in 2007, while the private sector, which represents 60 percent
of Venezuela's gross domestic product, grew 8.2 percent.

The left-wing government of the oil-rich nation has used income from
high oil prices in recent years to fund social spending and expand the
state.

Consumer spending grew 18.7 percent in the year due to lower
unemployment and increased household incomes, the banks said.
(Reporting by Frank Jack Daniel, editing by Maureen Bavdek)