* 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 fuel inflation
By Eyanir Chinea and Brian Ellsworth
CARACAS, Feb 8 Venezuela devalued its bolivar
currency by 32 percent on Friday 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 loquacious Chavez, who
remains in Cuba after surgery for cancer that has threatened to
end his 14-year rule and 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, which require importers and travelers to apply for hard
currency through a state agency.
Chavez, 58, has not been seen or heard from in public since
his operation on Dec. 11, but aides visit him often and say he
is signing papers and issuing instructions.
The devaluation will ease a shortage of greenbacks that has
crimped imports and left many supermarkets barren of staples
such as flour.
It also provides more bolivars for each dollar the
government receives from crude exports. That takes the pressure
off state finances stretched last year by social spending, from
a massive home-building campaign to cash payments to poor
mothers, which helped Chavez win reelection.
But it pushes up prices for imported goods crucial to the
oil-dependent economy, fueling inflation. That could dent the
government's popularity at a time of uncertainty over whether
Chavez's cancer will force him to step down.
Announcing the devaluation at a late afternoon news
conference just before the start of Venezuela's long-weekend
Carnival holiday, Finance Minister Jorge Giordani said the move
would 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," Giordani said.
"Of course, we have taken this as a presidential order."
MORE GOVERNMENT CASH
Dollars on Venezuela's illegal black market had for weeks
been fetching nearly four times the official rate, 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 dollars from the government.
"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.
He added that future devaluations were likely given the
overall imbalances in the economy.
The government is also scrapping an exchange system based on
bond swaps known as SITME, which functioned in parallel to the
state currency board.
Giordani denied local media reports that SITME would be
replaced by a similar mechanism on a government stock exchange.
He said a new currency authority was being created that would
help oversee the proper use of foreign exchange.
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, prices of which are linked to the exchange
The central bank earlier on Friday reported that consumer
prices rose 3.3 percent in January, the second-highest monthly
increase in three years. It was higher than the inflation rate
in neighboring Colombia for all of 2012.
'MORE WITH LESS'
Vice President Nicolas Maduro 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," Maduro said during a televised speech about Venezuela's
satellite program earlier on Friday, before the announcement.
"We need to overturn the culture in which historically,
because of oil, we've done little with a lot."
Critics of Chavez's administration responded angrily.
"The lying government was hiding a shock treatment package,
and just minutes ago Mr. Maduro was talking about space!"
opposition leader Henrique Capriles said on Twitter.
Others likened it to the "Black Friday" devaluation in 1983
often seen as the definitive end to a decade-long era of
free-flowing oil wealth during the 1970s and early 1980s.
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. 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
the capital. "It's irrelevant whether or not Chavez comes back.
He's an ideological icon of a socialism that doesn't exist."