Venezuela seeks single-digit inflation 2012

The government forecasts 26 percent inflation this year and more than 20 percent for 2010.

“It is my main worry,” Merentes said in an interview with El Nacional newspaper.

Nelson Merentes AFP PHOTO

“We should all work on this issue so in a short time we can reach a single digit. But we have a chronic problem. In the 2010 budget we calculate inflation falling to 22 percent. We can keep working so in 2012 we reach a single digit.”

Venezuela’s inflation rate, Latin America’s highest, was 31 percent last year. In the 12 months through September this year, consumer prices rose 27.3 percent.

Merentes said a controversial law to reform the central bank was intended to give the institution “elasticity” in moments of crisis like the current world downturn.

The law, passed last week by the National Assembly, allows the bank to give special loan rates for strategic sectors, transfer more international reserves to a special government development fund Fonden, and also buy up debt issued by public bodies such as state oil company PDVSA.

Critics say the change undermines the bank’s autonomy, gives President Hugo Chavez more access to state funds for politically motivated means, and fuels inflation.

“What is wanted is to give elasticity in decision-making to the directors, during moments of world crisis like the current one…The reform of the Law of the Central Bank of Venezuela does not affect its autonomy,” Merentes said.

“What is happening here is not the financing of public spending, but investment. No one in their right mind would say Fonden should be eliminated.”