* Monthly rate in December was 3.5 percent
* Price controls capped rises in election year
* Economists expect substantial devaluation
By Daniel Wallis and Eyanir Chinea
CARACAS, Jan 11 Venezuela's inflation rate in
2012 was the lowest in four years as the effects of heavy
election-year government spending were offset by strict price
controls that kept the indicator within the central bank's
Consumer prices rose 20.1 percent, compared with a target of
20 percent to 22 percent, the bank said in a statement on
Business leaders say the controls are unsustainable
long-term, and local economists expect a devaluation of the
bolivar currency soon. That would increase government revenue
from oil sales, but would also push up prices.
Monthly inflation in December was 3.5 percent, the bank
said, meaning last year's annual figure was the lowest since
2008, when the authorities changed the way they calculate the
rate. In 2011 it was 27.6 percent, and 27.2 percent in 2010.
Prices for food and nonalcoholic drinks increased the most
last month, recording a 5.7 percent rise, followed by transport
costs, which climbed 3.3 percent.
President Hugo Chavez's socialist government has capped
prices for many consumer goods, helping keep a lid on inflation
that has traditionally been the highest in Latin America.
The central bank said all price categories, with the
exception of tobacco and alcoholic drinks, increased less last
year than they did during 2011.
In late 2011 the government extended controls that regulate
prices of products ranging from deodorant to meat, while fixing
That helped keep prices in check in a year that brought two
elections - a presidential vote in October and state polls in
December - despite government spending on welfare programs
ranging from home building to cash stipends for single mothers.
It also helped cancer-stricken Chavez win a new six-year
term, though he is fighting to recover from surgery in Cuba and
has not been seen in a month.
Meanwhile, major policy decisions - including a currency
devaluation - appear to be on hold. Last year's blowout campaign
spending supported economic growth of 5.5 percent, according to
the government's preliminary figures.
A devaluation would slow capital flight as dollars sold
illegally on the black market now fetch more than four times the
official rate of 4.3 bolivars.
It would also help boost the flow of dollars into the
economy, ensuring merchants have dollars to import basic
products such as wheat flour that have disappeared sporadically
in recent weeks.