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Venezuela's Currency Plunges on Its First Day of Free Trading VOA News 13 Feb 2002 18:12 UTC 
Venezuela's currency, the bolivar, lost more than a fifth of its value Tuesday - its first day of free trading after the government abandoned a five-year-old policy that kept the currency within a fixed range.
The bolivar was quoted anywhere between 970 and 1,002 to the U.S. dollar, which amounts to a devaluation of as much as 21 percent from its previous value. Analysts expect the free-fall to continue until the market adjusts to the new situation.
Meanwhile, the International Monetary Fund said letting the bolivar float was a step in the right direction, adding that it is prepared to help Venezuela if it becomes necessary. The devaluation is expected to raise Venezuela's exports and give a boost to government revenues, which have been sliding.
The decision to float the bolivar came after large amounts of foreign capital were pulled out of the country, draining the central bank of its foreign reserves and threatening its ability to keep the currency within the fixed range.
About $2 billion have left Venezuela since the beginning of the year - 600 million in the past three days alone - as increasing opposition to Venezuelan President Hugo Chavez has prompted investors to seek safer assets.
The fall in the world price of oil, which accounts for about 80 percent of Venezuela's export revenues, has also raised investors' fears about the country's prospects.
Mr. Chavez has been under pressure since late last year due to widespread opposition against his new laws, which are believed to undermine private property rights. Last week, two high-ranked militaries called for his resignation, saying his administration threatens democracy in the country. The bolivar is the second Latin American currency to be floated this week. On Monday, Argentina ended a decade-old policy that pegged its peso to the U.S. dollar.
Argentine officials began talks with the IMF Tuesday, on a plan to restore economic growth.
Some information for this report provided by Reuters and Bloomberg.
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