February 15, 2007
President Chávez announces currency reform to strengthen Bolívar

(Presidential Press Office- Ven-Global News) - "President Chávez said: 'We are going to cut three zeros from our currency; the Bolívar will recover all the ground it has lost against the dollar, the euro and other foreign currencies. Income tax will be also reviewed. The Law of Popular Defense against Hoards and Speculation will be passed by the Cabinet'.

During the new TV show Aló Presidente, the President of the Bolivarian Republic of Venezuela, Hugo Chávez, announced two important measures to recover the Venezuelans' standard of living.

First, he announced a 5 percentage point reduction in the value-add tax (VTA) and a currency reform to cut three zeros from the Bolivar.

'The reduction of the VTA will be as follows: three percentage points starting on March 1, and two percentage points staring on July 1,' he said.

He mentioned that the social and economic impact that could reduce from 14% to 19% will be shown in the reduction of three points in the annual inflation in order to reduce it to one digit.

These two measures will benefit all the Venezuelan population, especially the poorest sectors which are the most vulnerable in economic terms. Likewise, he called on the population to be 'alert and play the role of social comptrollers in businesses so that this measure is abided by starting next March 1.

Regarding the VTA gradual reduction, President Chávez pointed out that this measure represents a 'tax sacrifice' of around 6 billion bolivars per year.

He stated that a process to deepen other tax collection such as Income Tax forms will be implemented.

President Chávez said that this is the most vulnerable tax regarding collection goals. 'We haven't move forward regarding this tax (...) There's plenty to be done.'

He asked the Venezuelan Vice-president, Jorge Rodríguez, Minister of Finance, Rodrigo Cabezas, and the head of the Venezuelan tax office, José Vielma Mora, to speed up the battle to increase the efficiency levels regarding income tax. Likewise, he announced that a new tax on luxury items will be implemented soon.

By showing an old silver 5 bolívar coin, nicknamed the 'muscle,' President Chávez announced a currency reform. In other words, he will cut three zeros from the Venezuelan currency in order to recover the potential of the bolivar against other international currency.

This measure seeks, among other things: 'to reduce the per capita possession of banknotes, place it in international standards, give us higher efficiency in payment systems more efficient and produce positive psychological effects in people; it also will be a starting point to bring about a breakthrough in the historical fight against inflation to reduce it to one digit per year and creating a new bolivar.'

According to estimates of the financial authorities of the Bolivarian government, they have planned to finish, together with the Central Bank of Venezuela , the studies of the reform. During the second semester, the legal instrument that will rule this currency reform must be approved.

The goal is to implement the new monetary system in early 2008. President Chávez proposed February 4, 2008, to launch the circulation of the 'new bolivar.'

This important measure is suitable since Venezuela currently has a strong economy.

President Chávez did not only announce the gradual reduction of the VTA and the currency reform. He presented the decree of the 'Law of Popular Defense against Hoards, Speculation and Boycott to Food with Price Controls,' whose draft is almost ready.

He said that he will review it, together with the Presidential Commission for the Constitutional Reform, in order to pass it on next February 16, so that the Cabinet Council passes it soon.

This legal instrument will be applied to the entire food production chain. It will have different sections to protect people, and penalize retailers that do not follow the measure. For instance, the law provides for intervention, and inspection of licenses, among others.

It also provides for the people to inspect and supervise through the creation of the Committees of Social Control, which will protect the rights of consumers.

He publicly asked food national producers to abide by the law and not to give him reasons to expropriate processing plants, grocery stores and others that refusing to sell food to the people".