By Nelson Bocanegra
LA GUAIRA, Venezuela, Jan 12 (Reuters) - Venezuelan authorities backed by soldiers temporarily closed dozens of retail outlets for price gouging after a currency devaluation that triggered a frenzy of shopping but met market approval.
President Hugo Chavez announced the devaluation last week, cutting the exchange rate of the bolivar against the dollar by half for oil income and for imported goods deemed nonessential in a move to bolster state coffers.
The measure strengthens the financial balance sheet in South America's largest oil exporter but risks angering the leftist government's supporters ahead of a parliamentary election in September if prices rise and inflation speeds up.
Prices for international flights have already doubled, as the airlines charged the new 4.3 rate that applies to non-essential items. Since 2005 the bolivar was fixed at 2.15.
Thousands of shoppers mobbed stores to snap up imported TVs and computers, worried their savings will lose value.
To calm nerves, Chavez sent troops to monitor prices in shopping districts. At least 70 retailers have been shuttered in raids that continued on Tuesday.
National Guard soldiers armed with automatic rifles forced closure of a hardware store in the coastal town of La Guaira.
'We found a list where they were clearly remarking prices by up to 150 percent,' said Jose Useche, and inspector with the government's consumer watchdog.
Soldiers and officials closed two supermarkets belonging to a Colombian retailer controlled by France's Casino.
Chavez is a strong believer in state intervention in the economy and has nationalized many industries in the OPEC nation. He uses currency controls to prevent capital flight.
The leftist leader is gambling he can underpin his 50 percent support with increased spending in the lead up to the election to offset negative reaction price rises may bring.
Opposition leaders called on the government to issue payments to families in extreme poverty to soften the impact.
'This subsidy would help relieve the inflationary effect of the announced measures for the poorest families,' an alliance of opposition parties said in a statement.
BOND UPGRADE, COMPANIES HIT
The new dual exchange system fixes a rate of 2.6 to the dollar for essential items like food and medicine, but sets a much lower rate of 4.3 to the dollar for other goods and oil exports.
Venezuelan bonds ticked down slightly on Tuesday but were still at their highest level since September 2008 after a major rally on Monday. JPMorgan raised Venezuelan bonds to overweight from market weight.
'The FX devaluation is unambiguously positive for fiscal accounts and should limit external debt supply,' the bank said in a note on Monday, adding higher oil prices also influenced its decision.
The devaluation was less well received by foreign companies operating in Venezuela that stand to see the cost of their imports increase and the value of their bolivar profits shrink.
Oil driller Helmerich & Payne Inc said on Tuesday it expects to take a hit in its second quarter results after the devaluation, with an expected exchange loss of about $20 million. Its shares dropped 1.3 percent.
Shares of Spanish phone company Telefonica, the biggest foreign investor in Latin America, fell nearly 2 percent on Monday on worries it would see revenue losses for as much as $1 billion in Venezuela due to the devaluation.
Telefonica could take a 5 percent hit to its equity value because of the devaluation, analysts say.
On Venezuela's freely traded black market, the bolivar weakened to around 6.5 against the dollar on Friday on low volume and with very few people selling.
Venezuela's 2027 global bond fell 0.125 points to bid 82.875 with a yield of 11.538 percent.
For graphic charting Venezuelan inflation in 2009, click on http://graphics.thomsonreuters.com/RNGS/2010/JAN/VEN1.jpg)
(Additional reporting by Sujat Rao in London and Deepa Seetharaman and Walker Simon in New York; writing by Frank Jack Daniel, editing by Anthony Boadle) Keywords: VENEZUELA ECONOMY/ (frank.daniel@thomsonreuters.com; +58 212 277 2656; Reuters Messaging: frank.daniel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
LA GUAIRA, Venezuela, Jan 12 (Reuters) - Venezuelan authorities backed by soldiers temporarily closed dozens of retail outlets for price gouging after a currency devaluation that triggered a frenzy of shopping but met market approval.
President Hugo Chavez announced the devaluation last week, cutting the exchange rate of the bolivar against the dollar by half for oil income and for imported goods deemed nonessential in a move to bolster state coffers.
The measure strengthens the financial balance sheet in South America's largest oil exporter but risks angering the leftist government's supporters ahead of a parliamentary election in September if prices rise and inflation speeds up.
Prices for international flights have already doubled, as the airlines charged the new 4.3 rate that applies to non-essential items. Since 2005 the bolivar was fixed at 2.15.
Thousands of shoppers mobbed stores to snap up imported TVs and computers, worried their savings will lose value.
To calm nerves, Chavez sent troops to monitor prices in shopping districts. At least 70 retailers have been shuttered in raids that continued on Tuesday.
National Guard soldiers armed with automatic rifles forced closure of a hardware store in the coastal town of La Guaira.
'We found a list where they were clearly remarking prices by up to 150 percent,' said Jose Useche, and inspector with the government's consumer watchdog.
Soldiers and officials closed two supermarkets belonging to a Colombian retailer controlled by France's Casino.
Chavez is a strong believer in state intervention in the economy and has nationalized many industries in the OPEC nation. He uses currency controls to prevent capital flight.
The leftist leader is gambling he can underpin his 50 percent support with increased spending in the lead up to the election to offset negative reaction price rises may bring.
Opposition leaders called on the government to issue payments to families in extreme poverty to soften the impact.
'This subsidy would help relieve the inflationary effect of the announced measures for the poorest families,' an alliance of opposition parties said in a statement.
BOND UPGRADE, COMPANIES HIT
The new dual exchange system fixes a rate of 2.6 to the dollar for essential items like food and medicine, but sets a much lower rate of 4.3 to the dollar for other goods and oil exports.
Venezuelan bonds ticked down slightly on Tuesday but were still at their highest level since September 2008 after a major rally on Monday. JPMorgan raised Venezuelan bonds to overweight from market weight.
'The FX devaluation is unambiguously positive for fiscal accounts and should limit external debt supply,' the bank said in a note on Monday, adding higher oil prices also influenced its decision.
The devaluation was less well received by foreign companies operating in Venezuela that stand to see the cost of their imports increase and the value of their bolivar profits shrink.
Oil driller Helmerich & Payne Inc said on Tuesday it expects to take a hit in its second quarter results after the devaluation, with an expected exchange loss of about $20 million. Its shares dropped 1.3 percent.
Shares of Spanish phone company Telefonica, the biggest foreign investor in Latin America, fell nearly 2 percent on Monday on worries it would see revenue losses for as much as $1 billion in Venezuela due to the devaluation.
Telefonica could take a 5 percent hit to its equity value because of the devaluation, analysts say.
On Venezuela's freely traded black market, the bolivar weakened to around 6.5 against the dollar on Friday on low volume and with very few people selling.
Venezuela's 2027 global bond fell 0.125 points to bid 82.875 with a yield of 11.538 percent.
For graphic charting Venezuelan inflation in 2009, click on http://graphics.thomsonreuters.com/RNGS/2010/JAN/VEN1.jpg)
(Additional reporting by Sujat Rao in London and Deepa Seetharaman and Walker Simon in New York; writing by Frank Jack Daniel, editing by Anthony Boadle) Keywords: VENEZUELA ECONOMY/ (frank.daniel@thomsonreuters.com; +58 212 277 2656; Reuters Messaging: frank.daniel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.