Hugo Chavez crackdown on 'mafia' street lenders in Venezuela

Published on Saturday 15 May 2010 19:25

VENEZUELA'S President Hugo Chavez has announced a crackdown on money lenders and currency exchanges in a desperate bid to stop the crashing bolivar currency.

Venezuela's foreign exchange market is already crippled after the government moved to end currency speculation and stem the fall of the bolivar with new rules some economists fear will cause economic turmoil.

Now Chavez has moved to end all currency trading.

On Friday a series of raids by government forces were carried out on small illegal money changers in Caracas.

"We are battling a mafia ... We are going to give them the mother of all blows," Chavez said.

Caracas has a number of downtown money changers who operate on street corners and in small offices in an area known for its gold trade.

Under a reform passed by legislators last week, the central bank will oversee all transactions in the market where the bolivar is traded freely via securities.

Chavez threatened to close all the country's brokerages and financial trading houses after the bolivar lost 25 per cent against the dollar this year.

The weak bolivar is raising the cost of consumer products in the import-dependent country and helped drive inflation to 5 per cent last month. Economic problems are hurting Chavez's ratings ahead of September legislative elections.

Meanwhile, Chavez has confirmed he will not be in Spain next week when leaders of the European Union, Latin America and the Caribbean meet.

Chavez had warned earlier that he might stay away from the Madrid conference if Honduran leader Porfirio Lobo attended. Chavez strongly supported former Honduran leader Manuel Zelaya, who was ousted by a coup last June.

The vice-chancellor, Francisco Arias Cardenas, will attend the meeting in his place.

Chavez, who has repeatedly called the Honduras government illegitimate, recently said he will support the decision of Central American nations to recognise Lobo as president, if Zelaya is allowed to return home and has his political rights restored.

Lobo won the presidency in November, in an election that had been scheduled before Zelaya was overthrown in a political crisis that arose when he tried to hold a referendum on Honduras's constitution.