The intricacies of Venezuela’s bizarre economic policy apparatus long ago became a subject approached with confidence only by seasoned specialists. Undaunted, Caracas this month decided to make an already byzantine currency system even more complicated by introducing another official exchange rate to the two (plus the black market version) that already exist.
The move came after pressure from falling oil prices, which have hammered Venezuela’s exports and reduced its dollar earnings. Other countries with similar problems in recent years such as Iran (and to some extent, Argentina) have also taken the route of multiple exchange rates. Read more
As Venezuelans queued to buy dollars last week to protect their savings from the world’s fastest inflation, intelligence agents arrested Antonio Ledezma, the opposition mayor of Caracas, on suspicion of being part of a coup plot backed by the US.
The news at least provided some distraction for a country mired in economic crisis, where GDP is expected to shrink 7 per cent this year and where citizens are reeling from effects of the latest back-door devaluation. Read more
One of the world’s most complex foreign exchange regimes, in a country with some of the world’s cheapest petrol, is wiping out profits at some of the world’s biggest carmakers.
First, Ford said it would take a charge of $350m in the first quarter because of currency losses in Venezuela, adding to its woes after a $126m loss on its South American operations in Q4 2013 caused by downtime in Brazil preparing for new products and “limited availability of US dollars” in Venezuela. Read more
Well, that didn’t last long.
Venezuela launched its long-awaited Sicad 2 dollar market on Monday, in what many hoped would be a step towards normalisation of the country’s dysfunctional foreign exchange market. Read more
The unrest that has left at least 20 people dead goes on in Venezuela. Over the weekend, protesters were confronted by security forces while attempting to make an “empty pots march” on the food ministry in Caracas, fed up with worsening shortages that have left one in four basic goods missing from the city’s shops.
One cause is a chronic, government-imposed shortage of dollars to pay for imports. While resisting calls for wholesale reform, on Monday officials are set to launch a new, less stringent system of foreign exchange controls that, it is hoped, will provide some relief. Read more
Demonstrators are still out in the streets of Caracas venting anger over a raft of problems, including rampant shortages of basic goods, which economists say are a by-product of foreign currency restrictions.
Unrest has been mounting in Venezuela, as pro-and anti-government groups keep clashing. Amid such mayhem, the government took some time to fiddle, once again, with its foreign exchange system, this time introducing the new “Sicad 2.” Read more
Amid a heavily distorted economy battling a spiralling black market rate for greenbacks, Venezuela on Wednesday finally unveiled plans to reform its tight currency control system that has been in place for more than a decade, a move that market watchers say amounts to a stealth devaluation.
“We are creating a system of bands in a new currency system,” said Rafael Ramírez, the president of the state oil company PDVSA, who is also the energy minister and vice president in charge of the economy, during a news conference. He insisted that, “this is not a devaluation, but a different foreign exchange system, with bands.” Read more
No devaluation here?
As growing distortions wreak havoc in Venezuela’s economy after a decade of price and currency controls, there have been many calls for the government to make an aggressive adjustment, a real devaluation.
Well, according to Wednesday’s state of the union speech by president Nicolás Maduro, it is not going to happen, not this year, not for many years, as he confirmed the current exchange rate of 6.3 bolívars to the dollar. But amid a reshuffle of some of his top economic aides, the president announced what some economists are calling a “disguised”, “gradual”, “implicit” or even “incomplete” devaluation. Read more
Foreign companies operating in Venezuela have to put up with no small amount of inconvenience. Aside from runaway inflation, which drives up operating costs, they also have to watch the money they make in the country depreciate because Venezuela’s tight capital controls mean they can’t easily repatriate it back home.
On Thursday, Movistar, a subsidiary of Spain’s Telefónica and the second-largest mobile carrier in the country, discovered yet another risk associated with working in Venezuela: price controls. Read more
Venezuela’s economy is in such disarray that there is now a whopping 660 per cent difference between the official exchange rate and the black market one. As of Tuesday, greenbacks could be sold on the black market in some corners of Caracas for up to 48 bolívars per US dollar, compared with the official rate of 6.3.
To try and stop the bolívar’s plunge, Nelson Merentes, finance minister, said during a televised interview on Monday evening that the government would soon unveil yet another foreign-exchange system. Read more
Some call it “the most complex exchange rate system in the world” – and with good reason.
In Venezuela, there is the official, fixed exchange rate, which for many Venezuelans is a mere fiction; there is the black market exchange rate, which is known as the “unmentionable” rate since it is a criminal offence to do so; and then there is the Sicad rate, a more recent invention that occupies a grey area somewhere in between. Read more
The Venezuelan toilet paper shortage story says a lot about economic management in a country where the greenback fetches five times its official value on the parallel market.
While Venezuelans have struggled to get their hands on everything from loo roll to toothpaste, authorities have been in denial about the grinding liquidity crunch that makes ordinary life – and business life – a daily struggle.
But on Friday, for the first time since March, the Central Bank granted many businesses access to the coveted US dollar – offering up another $200m – via a revamped Sicad, a type of currency auction selling dollars for bolívares. Read more
Somewhat distracted lately with the death of Hugo Chávez, Venezuela’s government is finally getting around to replacing a system it scrapped well over a month ago that allowed importers to access foreign currency.
With shortages of basic goods worsening by the day as a result and fresh elections just around the corner on April 14, it was clearly prudent to devote some attention to the issue. Read more
If you thought economic debates were dull, stolid affairs, then think again. Just take a look at the debate currently raging in Venezuela for a master class in how to jazz up your economic rhetoric, after the government announced a devaluation last Friday.
While on the one hand you have critics saying the move was a result of “ideological necrophilia”, on the other there are officials scolding Venezuelans for acting like “nymphomaniacs”. Read more
Just how merry a lot of Venezuelans will be this Christmas depends to some degree on how many dollars the government decides to make available.
But with currency controls in place since 2003, it is becoming increasingly clear that the government is not terribly inclined to dish out too many dollars just now – only on Thursday the central bank president was forced to declare on national television that one of the official mechanisms for obtaining dollars was not in fact “paralysed”. Read more
If Venezuela’s finance minister Jorge Giordani is to be taken at his word, the OPEC country has entered a “new phase” of “stable and sustainable” growth.
Certainly, the economy’s 5.2 per cent growth in the third quarter announced by the government on Tuesday is not to be sniffed at, but there is a growing chorus of voices that suggest that Giordani’s projection of 6 per cent GDP growth for 2013 is at the very least optimistic. Read more