General Motors Corp. is halting production in Venezuela for three months starting Friday. Ford Motor Co.'s subsidiary announced 10 percent cutbacks last week. Other automakers also are shrinking their business — but not because Venezuelans don't want to buy cars. They're closing down because the government won't give them enough dollars to import parts.
It's a crisis entirely brought on by the currency controls imposed by President Hugo Chavez, Gabriel Lopez, president of Ford Motors for Venezuela and the Andean region, told The Associated Press. "Year after year we're shrinking by about 10 percent compared to the year before," he complained.
Chavez began regulating access to dollars and making it harder for businesses and people to transfer money in 2003, after confidence in his government was shaken by a failed coup and a subsequent strike. Venezuelans must now apply to the currency agency Cadivi for dollars at the official rate of 2.15 bolivars to import goods or take vacations.
Venezuela is also cutting back sharply on other types of financial support for its neighbors, a cornerstone of its regional influence. One recent study by the Center of Economic Investigations, a financial consulting firm here, found that Venezuela had announced plans to spend only about $6 billion abroad this year, down from $79 billion in 2008.
These controls have backfired with a vengeance — businessmen, companies and private citizens transferred some $72.7 billion out of Venezuela over the last six years — nearly double the outflow of the previous six years, according to the Central Bank — distorting the economy, fueling inflation and discouraging private investment.
Venezuela ran a trade deficit of $1.4 billion in the first quarter of this year, and $3.7 billion in last year's fourth quarter — its first in more than a decade. >>> Go to Full Story >>>