Chavez Orders Federal Takeover Of Venezuelan Ports

ChÃ¡vez Orders Federal Takeover of Venezuelan Ports

http://online.wsj.com/article/SB1237...fox_australian

By JOHN LYONS and DARCY CROWE
3/23/2009

Venezuelan President Hugo ChÃ¡vez deployed troops on Saturday to seize several key air and maritime ports, while introducing economic measures meant to close a revenue shortfall caused by plunging oil prices.

Mr. ChÃ¡vez's takeover of the air and sea ports, including one in Carabobo state that handles much of the nation's non-oil trade, gives the federal government direct control over lucrative transportation hubs that were previously managed at the state level. The move also deals a blow to Mr. ChÃ¡vez's political opposition, as several of the key installations are in states controlled by opposition governors.

Mr. ChÃ¡vez, a 54-year-old former army officer, is scrambling to recalibrate his decade-old presidency as oil-price declines threaten a key source of his power: giant subsidies for everything from food and health care to gasoline.

Mr. ChÃ¡vez vowed to continue welfare spending even as the government's oil revenue declines.

"This crisis is going to strengthen us," Mr. ChÃ¡vez said in televised remarks Saturday.

Venezuela, a member of the Organization of Petroleum Exporting Countries, gets more than 90% of its foreign exchange from oil exports.

Morgan Stanley economist Boris Segura forecasts an economic contraction of 4%, and at least three U.S. economists are predicting Venezuela's currency will devalue this year.

Mr. ChÃ¡vez has vowed to avoid what would be a politically embarrassing devaluation of the "strong bolÃ^var" currency he introduced just last year. Instead, the president is seeking to increase government revenue with a bet that oil prices will resume their climb in the coming months and pull Venezuela out of its economic hole.

On Saturday, Mr. ChÃ¡vez said the government would raise the sales tax, while cutting spending by 6.7% and nearly tripling the nation's planned domestic borrowing to 34 billion strong bolÃ^vars ($15.8 billion).

Some observers reacted skeptically to the measures. In a research note published on Sunday, Goldman Sachs economist Alberto Ramos noted that measures such as raising the sales tax could worsen the economic slowdown. Mr. Ramos said the country may have to cut spending further -- another drag on the economy -- or borrow more.