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Venezuelan consumers fear inflation, dump cash after Chávez devalues bolivar
"People, do not let them rob you," he said. "Denounce it."
The government's measures were met with market approval. Bonds rose Monday as investors determined that Venezuela had immediately improved its ability to meet its financial needs. Many economists had long contended that Venezuela's currency had been heavily overvalued, hurting the country's finances and crippling exports outside the vaunted oil industry.
Ricardo Sanguino, a pro-government deputy in Venezuela's Congress, told state television Tuesday that the measures would spur domestic industry. "We are in a new phase, a phase to increase national production," he said.
But the devaluation, which permits Chávez to ramp up spending ahead of congressional elections in September, is expected to lead to an inflation rate of as much as 60 percent this year, according to some economists. Last year, inflation stood at 25 percent, among the highest in the world.
A former director of Venezuela's central bank, Domingo Maza Zavala, said in a phone interview from Caracas that he predicts inflation will hit nearly 50 percent.
In a healthy economy, he said, a devaluation could be beneficial. But he said that Chávez's management of the economy, which includes widespread nationalizations and other regulations, has sapped investor confidence.
The economy contracted 2.9 percent last year, and Maza Zavala said he expects it to shrink at nearly the same rate in 2010, even as other economies in the region are expected to post healthy growth.
"This year, with the devaluation, the economy will not recover," Maza Zavala said. "The recession that began in the third quarter last year will continue."
Antonio Ledezma, the mayor of Caracas, said at a news conference that he expects Venezuelans to put their money in durable goods and dollars.
"What can a citizen do but conclude that his money is best invested in a toaster he really doesn't need?" Ledezma said.