Venezuela Cuts Dollar Quota For Foreign Travel By Half

Venezuela Cuts Dollar Quota For Foreign Travel By Half

CARACAS -(Dow Jones)- The Venezuelan government cut in half the legal limit on dollars that Venezuelans can buy at the official exchange rate for travel abroad, a new sign that the governments expects to receive less U.S. currency next year because of the drop in oil prices.

In 2009, Venezuelans will be allowed to spend $2,500 abroad, down from the 2008 limit of $5,000, the government said in an official press release.

The government pegs the dollar at an official exchange rate of 2.15 bolivars, severely undervaluing the national currency. In the parallel market, a dollar currently fetches around VEB5.5.

Venezuelan's commonly use their dollar quota to profit from the gap between the official and parallel exchange rate, buying dollars at the VEB2.15 peg and selling them in the parallel market.

Slashing the dollar quota for travelers is the first measure introduced by the government of President Hugo Chavez to confront a difficult economic picture in 2009 as the price of oil, the source of more than 50% of the government's revenues and 90% of its exports, has plunged in recent months.

The government calculated its $78 billion budget for next year using an oil price forecast of $60 per barrel, almost twice the current $32.14 per barrel price for Venezuela's crude basket.

Finance Minister Ali Rodriguez warned earlier in December that the government could curb the dollar allocation for travelers and refused to rule out a devaluation of the bolivar in 2009, a measure that most economist view as inevitable if oil prices continue declining.

The government is also working on creating a so-called foreign currency budget for 2009 to outline which economic sectors will be first in line to buy greenbacks from the government at the official rate.

The government's currency commission already gives priority to some sectors, such as food importers and the health-care industry over others like car companies, following loose guidelines from the Chavez administration.

Under the new plan, the government would set stricter rules to limit sales to companies and economic sectors that aren't viewed as a priority.

-By Darcy Crowe, Dow Jones Newswires; (58) 414 249 6821; [email protected]

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(END) Dow Jones Newswires

December 31, 2008 13:45 ET (18:45 GMT)

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