Thursday, April 24, 2003

March 3, 2003
Venezuela's Inflation Reached 7.1% Last Month, a 7-Year High

CARACAS, Venezuela, March 2 - The Venezuelan monthly inflation rate rose to
a seven-year high in February on increased demand as price controls and
restrictions on dollar sales caused shortages.

Consumer prices rose 5.5 percent in February compared with a 2.9 percent
rise in January, the central bank said in its monthly report, which was
released over the weekend. February's inflation rate was the highest since
a reading of 7.1 percent in June 1996. The 12-month trailing inflation
rate approached 39 percent, the highest since 1997.

In February 2001, prices rose 1.8 percent.
"Controlling prices has had less impact than the authorities expected," a
central bank director, Armando León, said, as quoted in the newspaper El
Universal. "It's caused a fall in the supply of goods."

The government fixed maximum prices for some goods last month to stem
inflation. Producers say they cannot make a profit selling at the fixed
price and have reduced output. Rising prices threaten to further undermine
support for President Hugo Chávez, who is facing wide opposition and calls
for a referendum.

A two-month general strike aimed at ousting Mr. Chávez cut oil exports,
the source of much government revenue, leading to a 17 percent contraction
of the economy in the fourth quarter.

The government banned foreign currency trading in January and expects in
mid-March to begin selling dollars to importers of what the government
considers essential goods.

"We must have development from the inside and not be dependent on outside
forces," Mr. Chávez said in a televised speech.
Venezuela imports about 60 percent of its food, medicine, electronic goods
and clothing. Imports fell 29 percent last year, to $12.3 billion.