FACTBOX-Venezuela devalues bolivar currency

CARACAS, Feb 8 (Reuters) - Venezuela on Friday devalued its bolivar currency in a widely expected move that will ease pressure on government finances after President Hugo Chavez's heavy campaign spending last year, but is likely to spur the OPEC nation's inflation.

The following are some facts about Venezuela's bolivar:

* This is the fifth official devaluation since Chavez's 2003 creation of currency controls, which distribute dollars through government agencies in efforts to control capital flight.

The system has spawned a black market for greenbacks, which by early 2013 were fetching about four times the official rate. Regulations prohibit local media from publishing the black market rate.

The currency control arrangement has in some instances helped control the cost of imported goods such as food by providing dollars at a preferential rate.

But a scarcity of dollars on both the official and black markets by early 2013 was slowing imports and creating periodic shortages of basic consumption goods such as bread, flour and sugar.

The system has also let entrepreneurial Venezuelans make quick money by buying dollars at the official rate and immediately reselling them for triple or quadruple the price.

* Because Venezuela is highly dependent on imports to supply consumer goods, currency devaluations - which make imports expensive - tend to cause significant inflationary pressure.

The Chavez government in 2011 and 2012 kept inflation in check by capping prices on consumer goods ranging from meat to deodorant. A devaluation is likely to boost conflict between the government and local businesses that will want to hike product prices to reflect higher costs.

* A devaluation will help Venezuela reduce its heavy foreign borrowing after years relying on global capital markets and Chinese financing.

Venezuela together with state oil company PDVSA in 2011 issued some $17.5 billion in global bonds. In 2012, it revamped an oil-for-loans agreement with China that let it double the amount it can borrow to $8 billion.

The exchange rate adjustment would also lower the value of some 216 billion bolivars of local debt, issued primarily to Venezuelan banks, that was outstanding as of the middle of 2012.

* The move would also open Chavez up to criticism by opposition leaders for applying the very same economic shock therapy he accused opposition candidate Henrique Capriles of preparing.

Devaluations frequently form the backbone of economic reforms ordered by the International Monetary Fund at times of economic crisis. Though Chavez has vastly expanded social spending, critics say his government's recurrent devaluations and inattention to inflation have eaten away at the salaries and living standards of the country's poorest.

* The currency in Venezuela's oil-dominated economy has a recent history of instability. Financial turmoil in the 1990s led to rapid loss in value, with bands, fixed rates and a free float all unsuccessful in stopping the decline. In contrast, Venezuela's currency was one of the strongest in the region in the 1970s. At that time Venezuelans became famous in Miami shopping malls for the catch phrase "Esta barato, dame dos!" (It's cheap, give me two!)

(Additional reporting by Caracas newsroom)