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Venezuelans crowd together inside an electrical appliance store in Caracas on January 9, 2010. Thousands of Venezuelans went to the stores Saturday to buy imported products anticipating a raise in their prices after Venezuelan Presidnet Hugo Chavez announced Friday the devaluation of the bolivar. The move should come as a boon to the massive public sector, while adding pressure to an already soaring inflation rate, experts said Saturday. AFP PHOTO/Carlos RamirezCARLOS RAMIREZ/AFP / Getty Images

Venezuela's Hugo Chavez ordered soldiers to seek out businesses that raise prices after a sharp devaluation of the bolivar currency last week, saying his government will not tolerate price speculation.

"Right now, there is absolutely no reason for anybody to be raising prices of absolutely anything," he said on his weekly TV show, two days after announcing a dual exchange system for the fixed rate bolivar.

"I want the National Guard on the streets with the people to fight against speculation," he said to applause. "Publicly denounce the speculator and we will intervene in any business of any size."

The socialist Chavez believes the state should have a hefty role in managing the economy. During his 11 years in office he has nationalized most heavy industries, while business and finance are tightly regulated.

The former paratrooper says the devaluation will help make Venezuelan companies more competitive but he warned the government would take over shops and give them to their workers if price rises were discovered.

South America's top oil exporter imports most consumer products. Under the new system, food and medicines will be imported at an exchange rate of 2.6 bolivars to the dollar while non-essential goods will be bought at a rate of 4.3 per dollar. Since 2005 the bolivar had been fixed at 2.15.

Venezuelans packed electrical goods stores Saturday, fearing prices will double as the cost of imports rise.

Some analysts say the inflationary impact of the devaluation will not be so severe, pointing out that in reality much of Venezuela's imports are already paid for with dollars bought on a semi-legal black market, where the bolivar is worth about a third of its official rate. It closed at 6.15 Friday.

Other top officials have said in recent days that Venezuela's inflation, already the highest in the Americas at 25 per cent last year, will be pushed up by the devaluation.

Chavez said the measures would make businesses and farmers more competitive and help wean the country off imported goods.

"This is going to mean more economic and financial strength for the government, for the oil industry, which belongs to us all, and therefore fiscal strength. We are going to have more resources for social investment," Chavez said late Saturday.

Chavez said subsidies introduced by his government, along with the stronger exchange rate for food and medicine would protect the poor from a bump in inflation.

"This government protects and will continue to protect the weakest with investment and with special attention," he said.

The devaluation is a relief for state oil company PDVSA, which has struggled to pay service providers and meet requirements to fund social projects since crude prices dropped sharply last year.

Holders of Venezuela's foreign debt are also pleased, since the devaluation improves government finances and lessens the need to issue more bonds.

Last month, BMO Capital Markets cut ratings on Colgate-Palmolive Co, Avon Products Inc and Kimberly-Clark Corp to "market perform" saying a possible devaluation in Venezuela could hurt the U.S. consumer goods makers' profits.



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