CARACAS (Reuters) – Venezuela devalued its bolivar currency for the second time in 12 months on Thursday, abolishing the lowest exchange rate to the dollar as the OPEC member battles to revive its economy.

The announcement followed a central bank estimate that the economy contracted 1.9 percent in 2010, Venezuela’s second straight year of recession.

The central bank said it would eliminate the exchange rate of 2.6 bolivars per dollar, which has been available for essential imports such as medicines and some foods, accounting for about 30 percent of all forex transactions.

Economists had forecast a devaluation given the parlous state of Venezuela’s finances despite high global oil prices. Crude and products account for about 90 percent of Venezuela’s exports.

They expected that President Hugo Chavez, who trumpets his “21st century socialism” policies as a model for the world, would want to take the political pain of a devaluation as early as possible before seeking reelection at the presidential poll in December 2012.

Venezuela’s economy shrank by 3.3 percent last year, but Chavez’s socialist government says the country is now pulling out of recession and will grow by 2.0 percent in 2011.

“Politically, it is the right thing to do. They are devaluing now so as to avoid it in 2012 and take the inflationary hit in 2011,” said local analyst Miguel Octavio, of BBO financial services. “It’s brutal for the ordinary Venezuelan because it will affect food and medicine prices.”

CARACAS (Reuters) – Venezuela’s economy shrank an estimated 1.9 percent in 2010, marking a second year of recession as the South American nation fails to match the recovery in other countries after the global financial crisis, the Central Bank said on Thursday.

The economy contracted 3.3 percent last year, but President Hugo Chavez’s government says the OPEC member is now pulling out of recession and is on course for 2 percent growth in 2011.

“We foresee a positive tendency for 2011,” the Central Bank said in its annual report on preliminary economic data for this year.

The report said oil GDP shrank 2.2 percent in 2010 while the non-oil economy fell 1.8 percent.

Estimated annual inflation in December was 1.6 percent, bringing the annual consumer price rise for 2010 to 26.9 percent, up from 25.1 percent last year, the bank said.

Venezuela’s inflation is among the highest in the world. Central Bank President Nelson Merentes told state TV that inflation for next year was forecast at between 23-25 percent.

In the bank’s report, Merentes said electricity rationing — caused by a shortage of rain earlier this year — was a factor in the economy’s performance in early 2010 before “signs of recovery” could be seen later in the year.

CARACAS (Reuters) – Venezuela condemned on Thursday the United States’ revocation of its ambassador’s visa as an “imperial” move by President Barack Obama’s government, saying the measure should be immediately overturned.

In the latest flare-up between the ideological foes, Washington withdrew the visa of ambassador Bernardo Alvarez on Wednesday in retaliation for the rejection by socialist President Hugo Chavez of Obama’s nominated U.S. envoy to Caracas.

Diplomat Larry Palmer had criticized Venezuela’s government.

“This is a new aggression by the State Department,” Roy Daza, a prominent ruling party member who heads parliament’s foreign affairs committee, told Reuters. “The only possible solution is for the United States to rectify its position.”

The tit-for-tat appeared to bury any lingering prospects of rapprochement between the Obama administration and Chavez, who has inherited Fidel Castro’s mantle as Latin America’s leading critic of the United States.

Despite the diplomatic spat, few expect either Venezuela or the United States to risk jeopardizing trade ties — principally oil — crucial to both nation’s economies.

The South American OPEC member is the fifth biggest crude supplier to the United States, exporting about 1.2 million barrels per day of oil and products.

CARACAS, Dec 30 (Reuters) – Venezuela’s economy shrank an estimated 1.9 percent in 2010 in a second year of recession as the South American nation lags in the recovery cycle after the global financial crisis, the Central Bank said on Thursday.

The OPEC member’s economy contracted 3.3 percent last year when it entered recession, but President Hugo Chavez’s government says Venezuela is now pulling out of it and is on course for 2 percent growth in 2011.

“We foresee a positive tendency for 2011,” said the Central Bank report on the preliminary economic data for this year.

The report said oil GDP shrank 2.2 percent in 2010 while the non-oil economy fell 1.8 percent.

After estimated annual inflation of 1.6 percent in December, the annual consumer price rise for 2010 will be 26.9 percent, up from 25.1 percent last year, the bank said.

That makes Venezuela’s inflation among the highest in the world.

Central Bank President Nelson Merentes said electricity rationing — caused by a shortage of rain earlier this year – was a factor in the economy’s performance in early 2009 before “signs of recovery” could be seen later in the year.

WASHINGTON/CARACAS (Reuters) – The United States has revoked the visa of Venezuela’s ambassador to Washington in apparent retaliation for Caracas’s rejection of the nominated U.S. envoy, diplomatic sources said on Wednesday.

The move brings to the fore long-simmering tensions between Washington and the socialist government of President Hugo Chavez, who is the main U.S. critic in the region. The flare-up, however, is unlikely to affect an oil trade crucial to both nations.

Chavez had blocked Larry Palmer’s arrival after the American accused Venezuela’s government of close ties to leftist Colombian rebels. He also alleged declining morale and professionalism in Venezuela’s armed forces.

Caracas’s insistence on refusing to let Palmer take up his post prompted Washington to effectively expel Venezuela’s envoy, Bernardo Alvarez Herrera, by withdrawing his visa, the diplomatic sources said on condition of anonymity.

“It’s politicking as usual between these two but I don’t think we’re about to see a crude crisis. They both need to keep exports flowing,” said a non-U.S. diplomat in Caracas.

In a second year of recession, the South American OPEC member sells about 1.2 million barrels per day of oil and products to the United States, making it the fifth biggest U.S. supplier after Canada, Saudi Arabia, Mexico and Nigeria.

Although seeking to diversify its export portfolio to sell more to political allies like China, Venezuela cannot afford right now to drastically reduce sales to the United States. Threats by Chavez in the past to do so have not materialized.

WASHINGTON/CARACAS (Reuters) – The United States has revoked the visa of the Venezuelan ambassador to Washington in apparent retaliation for Venezuela’s rejection of the U.S. envoy to Caracas, a diplomat said on Wednesday.

The diplomat, who spoke on condition of anonymity, declined to provide further details. A State Department spokesman earlier declined to comment on the rift between Caracas and the United States.

Venezuela is the fifth biggest supplier of oil for the United States, after Canada, Saudi Arabia, Mexico and Nigeria.

In a briefing earlier on Wednesday, another State Department spokesman repeated the U.S. position that Venezuela could suffer consequences because of its objection to President Barack Obama’s selection of Larry Palmer to serve as Washington’s ambassador to Caracas.

The spokesman declined to specify any consequences. He also said that, as far as he knew, Venezuela’s ambassador to the United States was out of the country.

Washington and Caracas have been sharply at odds over Palmer’s appointment since August, when Venezuelan President Hugo Chavez said the envoy would not be allowed to take up his post because Palmer had criticized Chavez’s leftist government.

Venezuelan state media quoted Deputy Foreign Minister Temir Porras as confirming the revocation of the U.S. visa of Ambassador Bernardo Alvarez Herrera.

CARACAS (Reuters) – Venezuelan President Hugo Chavez made his first use of new decree powers on Sunday to create a $2.3 billion fund for reconstruction after widespread flooding that left more than 130,000 people homeless.

The South American OPEC member nation’s socialist leader has infuriated opposition parties and been criticized as a dictator for assuming fast-track powers for the next 18 months that will enable him to rule by decree and bypass parliament.

Chavez has justified the measure as necessary to enable the government to respond to recent torrential rains that swept away houses, smashed bridges and roads, and also killed around 40 people in the nation of 29 million.

But critics say the president has cynically exploited the disaster as an excuse to outwit opposition parties who were due to take a larger share of seats — 40 percent — in the incoming National Assembly which convenes on January 5.

“They do nothing for the people, and they are trying to stop me working for the people,” Chavez said of his critics as he announced the reconstruction fund, his first decree.

The Simon Bolivar Fund, named for Venezuela’s 19th century independence hero, would begin with 10 billion bolivars, or $2.3 billion at Venezuela’s middle exchange rate of 4.3 bolivars to the dollar, Chavez said.

A first 506 million bolivars would go to house-building in the western state of Zulia, the Venezuelan leader said on a visit to that region with Bolivian President Va Morales.

CARACAS, Dec 16 (Reuters) – Venezuelan President Hugo Chavez said on Thursday he had a “battery” of decrees ready to issue once parliament grants him special powers that opponents say are an attack on democracy in the South American nation.

The National Assembly — dominated by members of Chavez’s ruling Socialist Party — was set to approve the controversial “Enabling Law” giving the socialist leader yearlong decree powers late on Thursday or on Friday.

Latin America’s leading U.S. critic has used such powers three times before during his 11-year rule to pass about 200 laws, and says he needs them again to respond to an emergency caused by floods that have made about 140,000 people homeless.

“I have the first battery of 20 laws ready,” Chavez said during a visit to land near the international airport outside Caracas being taken over to build low-cost housing.

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More stories on Chavez’s decree powers at [ID:nVEDECREES]

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CARACAS, Dec 16 (Reuters) – Venezuelan President Hugo Chavez is taking decree powers for a year in a move he says is needed to deal with disastrous floods but opponents denounce as a calculated blow to democracy.

What are the possible consequences for South America’s biggest oil producer and its flamboyant socialist leader two years ahead of the next presidential election?

Here are possible scenarios:

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Full coverage: [ID:nVEDECREES]

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CHAVEZ DEEPENS REVOLUTION, HEADS FOR 2012 WIN

CARACAS (Reuters) – Venezuela’s parliament gave preliminary approval on Tuesday for President Hugo Chavez to rule South America’s top oil producer by decree for a year, prompting opposition accusations that the socialist leader is behaving like a dictator.

Chavez has ruled by decree three times before during his 11 years in power, and says he needs to again to deal with a national emergency caused by floods that have killed about 40 people and left almost 140,000 homeless.

Venezuela’s National Assembly supported the controversial proposal with a first vote on Tuesday. A second and final vote on the “Enabling Law” was expected by Thursday. Once passed, it would allow Chavez to issue decrees across a wide range of areas including housing, land, finances and security.

Private banks and property owners are bracing themselves for another wave of nationalizations by Chavez, who has taken Venezuela down a steadily more radical route in an effort to entrench “21st century socialism.”

“He is winning time with the tragedy to put limits on the new National Assembly,” opposition politician Pastora Medina told Reuters. “He is consolidating himself as a dictator.”

A freshly united opposition coalition won about half the popular vote at a parliamentary election in September to take 40 percent of seats in a new Assembly that will convene on January 5, when they had hoped to put a check on Chavez’s power.

“It is a brutal attack, without anesthetics, against democratic life,” said Teodoro Petkoff, editor of leading opposition newspaper Tal Cual. His paper denounced the decree move, along with a package of laws being rushed through, as a “totalitarian ambush … a Christmas ambush” for Venezuelans.