Venezuela to Stay Open to Devaluation, Rodriguez Says

Venezuelan Finance Minister Ali Rodriguez said he’ll keep the government’s options open for dealing with the effects of falling oil prices and won’t rule out a currency devaluation or a reduction in dollar sales.

Venezuela, the fourth-biggest supplier of foreign crude oil to the U.S., is taking steps to save dollars after oil prices collapsed over the past six months. The government relies on oil revenue to finance half its budget. “We’re applying measures to maintain reserves at an adequate level,” Rodriguez, 71, said today in an interview with Bloomberg Television at his office in Caracas. “We have to restrict all unnecessary spending. We’re doing it in the public administration, and we should do it together as an economy.”

Venezuela plans to tap its $42.4 billion in international reserves, and draw on off-budget development funds, to keep up spending on President Hugo Chavez’s social programs this year, Rodriguez said. Regarding plans to devalue the currency or institute a dual exchange rate, Rodriguez said he doesn’t “rule it out, but it’s not on the agenda of measures that will be immediately applied.”

Oil sales account for 93 percent of Venezuela’s total exports. Crude oil fell to $41.70 a barrel today, down 57 percent from a year ago.

Rate Adjustment

“In the middle of this difficult situation they’re experiencing because of the drop in oil revenue, they are going to have an adjustment to the exchange rate,” said Asdrubal Oliveros, a director at Ecoanalitica, an economic consulting company, in Caracas.

The government already cut in half the amount of dollars that each citizen can buy for travel abroad at the officially pegged exchange rate of 2.15 bolivars per dollar, which it says will save about $2.5 billion this year. Rodriguez said it’s likely the government also will cut back on the supply of dollars to import luxury items. That will force more consumers to turn to the parallel, unofficial currency market, where the bolivar traded today at 5.55 per dollar, 61 percent weaker than the official rate. For now, the government doesn’t have any plans to change the pegged exchange rate, which has been in place since 2005, in part because it would cause food inflation to accelerate, Rodriguez said. Last year Venezuela imported more $7 billion worth of food.

Venezuelan consumer prices rose 31.9 percent in December from a year earlier, the central bank reported today. That’s the fastest inflation rate among the 82 economies tracked by Bloomberg. The government plans to restart talks next week with Banco Santander SA over the nationalization of its local unit, which was announced last year, Rodriguez said.