Venezuela sees 2012 inflation at 19.9 pct, below target

Reuters Middle East

* Price controls helped keep inflation in check

* Currency devaluation seen spurring inflation in 2013

CARACAS, Dec 29 (Reuters) - Venezuelan inflation reached

19.9 percent in 2012, the central bank said in a preliminary

estimate on Saturday, beating its official target thanks to

strict price controls that business leaders say are

unsustainable in the long term.

The government of President Hugo Chavez has capped prices

for a wide range of consumer goods, helping contain inflation

that has traditionally been the highest in Latin America. The

2012 target had been between 22 and 25 percent.

But inflation is seen accelerating in 2013 because Venezuela

is expected to devalue the bolivar currency after heavy campaign

spending this year that helped ensure Chavez's re-election.

Devaluing eases fiscal pressure on the government by

providing more bolivars for each dollar of crude exports, but

also pushes up the cost of importing basic consumer goods that

are not produced in the oil-dependent country.

In late 2011, when prices rose 27.6 percent, the government

began extended a system of controls that now regulate prices of

products ranging from deodorant to meat while fixing profit


This helped keep prices in check in an election year despite

heavy government spending on welfare programs ranging from

construction of homes for the poor to monthly cash stipends for

single mothers.

But business leaders say the controls have kept prices

artificially low, and that inflation is likely to bounce back.

Authorities on Thursday released preliminary estimates

showing the country's economy grew 5.5 percent in 2012, with the

construction sector among the fastest-growing thanks to a state

homebuilding program.

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