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.” Continue reading »
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. Continue reading »
The New Year has come but the same uncertainty as last year is still looming over Venezuela. Particularly, the genuine currency devaluation that many economists agree could correct the country’s deep economic distortions and narrow the budget gap is, so far, nowhere to be seen. Continue reading »
Many have been saying it is about time Venezuela devalued and loosened a strict exchange rate regime that has been in place for a decade.
In the meantime, the government appears to be making some moves amid a shortage of greenbacks by broadening the secondary currency auction system, known as Sicad. Continue reading »
Rafael Ramirez, Venezuela’s vice-president in charge of economic policy and current oil minister, has a message for the country’s detractors on Friday:
“A devaluation is not being planned here!” Continue reading »
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”. Continue reading »
For all the moaning in Venezuela about last Friday’s devaluation (which the most cynical critics were saying was absolutely essential, until it happened, and then it became a disaster), there is at least one group of people who are fairly content with the development: investors in Venezuela’s dollar bonds.
Once again, a move by Venezuela’s socialist government was in lockstep with the interests of those arch-capitalists on Wall Street. Look no further than the reaction of Venezuela’s sovereign bonds on Monday, with benchmark yields falling to a five-year low. Continue reading »
What do a Mexico tortilla maker and a Chilean wood panel manufacturer have in common with Colgate-Palmolive and Telefonica?
Answer: they all have sizeable operations in Venezuela and their shares are feeling the squeeze after the government of Hugo Chávez announced a surprise devaluation on Friday. Continue reading »
At last it happened. With traffic jams piling up all across the country as most Venezuelans were taking off for the beach to celebrate carnival, the government quietly announced a devaluation of its currency.
It was something that economists had long been saying was essential, with the dollars selling on the black market for almost five times the value of the official exchange rate this week. Continue reading »
It’s finally happened. Venezuela’s government announced Friday that is devaluing the country’s currency.
Officials said the fixed exchange rate is changing from 4.30 bolivars to the dollar to 6.30 bolivars to the dollar with immediate effect. It will also be scrapping the currency exchange system known as SITME through which Venezuelans could buy dollars for 5.3 bolivars. Continue reading »
Well, the hour came, but the man didn’t. Luckily a subservient judiciary meant that this was not such a problem for Hugo Chávez – his no-show at the start of his new presidential term today doesn’t really seem to matter. Continue reading »
Hugo Chávez’s designated successor, Nicolás Maduro, warned on Wednesday of “difficult” times ahead. Although Venezuela’s cancer-stricken president was successfully operated on this week, the recovery period is going to be “complex and tough”, he said.
This has significant implications for the economy, particularly given the fact that information minister Ernesto Villegas openly raised the possibility that Chávez might not even be back in time for the inauguration of his next presidential term on January 10th – in which case the people should be “understanding”. Continue reading »
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”. Continue reading »
How do you toast the victory of Hugo Chávez, Venezuela’s socialist president, who last Sunday won another six-year term, reconfirming him as one of Latin America’s most commanding political figures?
Not, perhaps, with Scotch, beer, or coca-cola. Indeed, the manufacturers behind virtually every international drink are more likely to be in the doldrums over the news than in celebratory mood. Continue reading »