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
“You want milk? Low fat? Skimmed?” asked a man who identified himself only as Juan. “I can get you milk, but it is going to cost you!”
My arrival for a three month reporting stint in Caracas has schooled me in some simple rules of life in the Venezuelan capital. One is that supermarkets almost never have milk, so if people want something to add to their coffee they need to find the telephone number of someone like Juan, a fixer.
The next rule is that once they’ve heard the price, they’ll prefer black coffee. Juan was charging 150 bolivares a litre ($24 at the official rate of 6.3 per US dollar). That is roughly ten times the cost of pasteurised milk at the regulated price in state-run supermarkets. 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
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. Read more
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. Read more
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!” 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
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. Read more
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. Read more
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. Read more
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. Read more
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. Read more
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”. 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
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. Read more