* Chavez still in Cuba, silent since cancer operation
* Devaluation of 32 pct follows heavy state spending in 2012
* Measure will improve access to dollars but spur inflation
By Eyanir Chinea and Brian Ellsworth
CARACAS, Feb 8 Venezuela devalued its bolivar
currency on Friday by 32 percent in a widely expected move that
will shore up government finances after ailing President Hugo
Chavez's blowout election-year spending in 2012 but will also
spur galloping inflation.
The country's fifth devaluation in a decade follows two
months of silence from the famously chatty Chavez, who remains
in Cuba after surgery for cancer that has threatened to end his
14-year leadership of a self-styled socialist revolution.
The move slashes the official bolivar exchange rate to 6.3
per dollar from 4.3 under currency controls Chavez created in
2003 that require importers and travelers to apply for hard
currency through a state agency.
Officials said Chavez ordered the measure from Havana.
The 58-year-old president has not been seen or heard from in
public since the Dec. 9 operation, but aides visit him often and
say he is signing papers and imparting instructions.
It will ease a shortage of greenbacks that has crimped
imports and left many supermarkets barren of staples such as
flour. But its inflationary impact could dent the government's
popularity at a time of uncertainty over whether Chavez's cancer
will stop him completing a third term in office.
Announcing the devaluation at a press conference just before
the start of Venezuela's long-weekend Carnaval holiday, Finance
Minister Jorge Giordani said the move would help provide revenue
for social projects and stimulate growth.
It would also help manage import levels and the cash flow
available for the OPEC nation's economic plans, he said.
"The president ... has demanded efficiency, increased
efficiency by the government in the sense of minimizing spending
and maximizing results," the finance minister said.
"Of course, we have taken this as a presidential order."
The devaluation takes the pressure off government finances
by providing more bolivars for each dollar the OPEC nation
receives from crude exports.
But it also raises prices for imported goods crucial to the
heavily oil-dependent economy, spurring inflation.
Most Latin American currencies are freely traded, meaning
any change in value is usually the result of investor
perceptions or changes in interest rates rather than a policy
decision ordered by state officials.
Dollars on the illegal black market had for weeks been
fetching nearly four times the official exchange, which
economists cited as a sign an exchange rate adjustment was
imminent. Businesses frequently have to tap this market because
they are unable to acquire greenbacks from the government.
CENBANK SYSTEM SCRAPPED
"It's positive not only because of the magnitude but because
they decided not to wait until a later date despite lingering
political uncertainty and all the issues around the health of
president Chavez," said Alberto Ramos of Goldman Sachs.
The analyst said future devaluations were likely given the
overall imbalances in the economy.
The government is also scrapping an exchange system known as
SITME, which functioned in parallel to the state currency board.
Venezuela has borrowed heavily since its last devaluation,
with the government and state oil company PDVSA selling $17.5
billion in new debt during 2011 alone.
Many of those issues were used in the SITME foreign exchange
system, which uses bond swaps to provide hard currency. The
heavy issuance has pushed Venezuela's bond yields to among the
highest of emerging market debt.
Chavez's popularity dipped noticeably after a 2010
devaluation that pushed up inflation to 27 percent that year,
and helped the opposition win almost half the seats in Congress
amid growing complaints about his government.
That devaluation affected the earnings of major consumer
goods companies with operations in Venezuela, including Avon
Products Inc and Colgate-Palmolive, whose
earnings in bolivars were worth less after the adjustment.
It also triggered a shopping spree in the capital Caracas as
consumers stocked up on imported goods such as washing machines
and refrigerators whose prices are linked to the exchange rate.
The central bank earlier reported that January inflation
reached 3.3 percent, the second-highest rate in three years and
higher than inflation of neighboring Colombia for all of 2012.
'MORE WITH LESS'
Vice President Nicolas Maduro, speaking at a press
conference just before the announcement, urged Venezuelans to be
more austere and efficient - a rare call in a nation accustomed
to flashy oil wealth.
"We have to learn to do a lot with a little, more with
less," said Maduro prior to the announcement in comments that
hinted at austerity. "We need to overturn the culture in which
historically, because of oil, we've done little with a lot."
Devaluations generally make local industries more
competitive in export markets abroad by lowering the cost of
production in respect to other countries.
But critics say the move is unlikely to contribute to a
significant expansion of domestic industry because of the
government's confrontation with the private sector, extensive
price controls and frequent unpaid expropriations.
Venezuelans on the streets of Caracas were frustrated but
resigned to the situation. The country has a long history of
devaluing to finance state spending, creating chronic monetary
instability and leaving citizens seeking hard currency.
"It increases inflation and quality of life will suffer,"
said publicity worker Maria Gonzalez, 30, at a supermarket in
Caracas. "It's irrelevant whether or not Chavez comes back. He's
an ideological icon of a socialism that doesn't exist."