Chavez Toughs It Out

President Hugo Chavez appears to have defeated his opposition's effort to oust him in a two-month strike that has dealt a devastating blow to Venezuela's economy and helped push world oil prices to more than $30 a barrel. As of Feb. 3, most workers had returned to their jobs. In the one sector where strikers refuse to go back, the oil industry, production is back up to around 1.5 million barrels a day--and rising. That's half the pre-strike levels, using only government-friendly staff. At state-owned Petroleos de Venezuela, Chavez has fired more than 6,000 workers and managers who supported the strike.

Now, the government is taking emergency measures to get its finances under control. The Central Bank is imposing exchange controls to protect Venezuela's foreign reserves, which have plunged to $11.2 billion because of lower oil revenues and efforts to defend the Venezuelan currency. The bolivar lost 25% of its value in January alone. But the economy will remain under strain, since it will take weeks to get oil exports back to normal. J.P. Morgan Chase estimates the economy will shrink 17% this year.

Meanwhile, the weakened opposition is still hoping Chavez will bow to international pressure for a constitutional amendment shortening his six-year term or an early referendum on his rule. A group including Brazil, Chile, Mexico, Portugal, Spain, and the U.S. is attempting to broker a compromise. But since Chavez is unlikely to budge, Venezuela's political divisions and economic pain seem set to continue.

By Stephen Ixer in Caracas

Edited by Rose Brady

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