Business

CARACAS, Venezuela (AP):

Venezuela's government and Central Bank on Monday announced new rules for trading in bonds that have become an important outlet for foreign-currency dealing.

Venezuelan banks will be able to sell investors' government bonds for dollars with prior approval by the Central Bank, which will have exclusive authority over the market.

Many questions remain about the system, such as what band of trading prices will be permitted by the Central Bank, and whether there are enough bonds available to meet demand for dollars.

The government ordered a halt to bond trading three weeks ago, as it moved to stem the falling value of the Venezuelan bolivar on the bond market.

President Hugo Chavez's government maintains strict currency controls and sets official exchange rates.

But the market in dollar-denominated bonds that people can buy with bolivars has been a legal route for trading currency - and a crucial source of hard currency for businesses that could not get dollars at the low official rates. Before the government intervened, the bolivar's value had fallen to about half the official rate of 4.30 to the dollar for non-essential goods.

Chavez has blamed speculative trading for eroding the currency's value, and securities regulators have taken over management of 36 brokerage firms while investigating alleged violations of currency controls or other irregularities. At least nine executives of those companies have been arrested.

Under the new trading system, the Central Bank will be able to inspect banks to make sure they are complying with new rules. A band of permitted prices is to be posted on the Central Bank website. It's unclear how often those prices could be adjusted.

Officials have said the bond market could reopen as soon as Tuesday, but it's unclear when banks will be ready to start. Monday was a bank holiday in Venezuela.

Experts have predicted there could be a significant shortage of bonds because of high demand, part of it caused by the long shutdown of trading.

The Caracas-based consulting firm Ecoanalitica has estimated that between $15 billion and $17 billion in bonds will be needed to meet demand.

The government has said banks currently have about $5.5 billion in bonds to feed the new system, but some banking analysts have estimated the country's banks have no more than $2 billion in bonds available.

… Gov't seizing 18 more companies

CARACAS, Venezuela (AP):

The Venezuelan government began taking over 18 food and retail distributors Monday, accusing them of irregularities.

Authorities have "temporarily occupied" the businesses and will later expropriate them, Commerce Minister Richard Canan told state television.

Ten of the companies, in Caracas, failed to keep proper records or store goods according to regulations, Canan said, according to the state-run Bolivarian News Agency. He said authorities elsewhere in the country took control of distributors of food and toilet paper and companies that package sugar.

President Hugo Chavez has vowed to crack down on businesses that allegedly speculate on prices or hoard goods. His government has also nationalised businesses in industries from telecommunications to steel to cement, as he strives to move toward socialism.

Weathering scandal

The latest measures against food distributors come as Chavez's administration is weathering a scandal that erupted last week after more than 20,000 metric tons (22,000 tons) of food imported by the government was found decomposing in storage at a port.

The president has also sharpened his criticism of the country's largest food producer, Empresas Polar, and its president, Lorenzo Mendoza, threatening to expropriate the corporation.

Chavez last week declared "economic war" on business leaders he accuses of driving up prices and hoarding products. The tensions between Chavez and the country's main business groups have grown as the country suffers a recession and 30 per cent inflation that is the highest in Latin America.

Venezuela, a major oil exporter, has seen sporadic shortages of some basic foods like milk and sugar in the past three years. Business leaders blame government price controls and other economic policies for the problems.