CARACAS – General Motors’ subsidiary in Venezuela abruptly announced Tuesday that it was shutting down operations in the country, and all the signs suggested it had decided to go for good.

General Motors Venezuela (GMV) President Ronaldo Znidarsis said production at the company’s plant at Valencia, capital of Carabobo state, would halt in late June – and he added that he didn’t know when GM would return to the country.

Znidarsis indicated that the problem was the company’s inability to obtain access to hard currency which it needed to pay for supplies brought in from abroad. GMV had been unable secure foreign exchange since November last year, he said.

The Venezuelan government imposed foreign exchange controls in February 2003, in a bid to curb capital flight out of the country as a two-month Opposition-led strike against President Hugo Chávez fizzled.

While the government eased the controls last year, Chávez has ordered the Foreign Exchange Administration Commission (Cadivi) to tighten them up again in response to the downturn in oil export earnings induced by the global financial crisis.

The renewed clampdown on hard currency has sparked warnings from the Venezuelan business community that companies will not be able to operate for lack of the means to bring in essential supplies of raw material, machinery and components.

Despite gloomy forecasts that strengthening foreign exchange controls will undermine the economy – and, in the end, that the people’s living standards will suffer – the government has vowed that the foreign exchange regime will remain in force for the foreseeable future.

Officials insist that the official exchange rate of BsF2.15 to the dollar will remain in force through to the end of the year. However, repeated avowals have not prevented speculation that the growing economic crisis will likely force the government into devaluation before then.

Znidarsis said that GMV’s debts to suppliers outside Venezuela now totalled $1.2 billion. The company had sufficient supplies to continue production until the planned close-down date, but after that closure would affect 4,000 employees at the Valencia assembly plant and another 70,000 people indirectly. “Without production, it’s difficult to comply with obligations to the workers,” he said.

General Motors has been active in Venezuela since 1944, and set up a plant in Caracas under the name GM Interamericana four years later. The Caracas plant closed in 1983, but by then General Motors had acquired Chrysler’s assembly plant at Valencia in 1979, when the local subsidiary was renamed GMV.

The company has claimed the market lead in Venezuela since 1980, with output of cars and trucks running at about 90,000 vehicles a year. Venezuela has always been a modest market for GM worldwide, which sold 8.35 million vehicles in 140 countries in 2008, and employs an estimated 244,500 people worldwide.