Coming soon to a country near you.
Venezuela's government announced Friday that it is
devaluing the country's currency, a long-anticipated
change expected to push up prices in the heavily
import-reliant economy.
Officials said the fixed exchange rate is changing
from 4.30 bolivars to the dollar to 6.30 bolivars to
the dollar.
The devaluation had been widely expected by
analysts in recent months, though experts had been
unsure about whether the government would act
while President Hugo Chavez remained out of sight in
Cuba recovering from cancer surgery.
It was the first devaluation to be announced by
Chavez's government since 2010, and it brought
down the official value of the bolivar by 46.5 percent
against the dollar. By boosting the bolivar value of
Venezuela's dollar-denominated oil sales, the change
is expected to help alleviate a difficult budget outlook
for the government, which has turned increasingly to
borrowing to meet its spending obligations.
Planning and Finance Minister Jorge Giordani said the
new rate will take effect Wednesday, after a two-day
banking holiday. He said the old rate would still be
allowed for some transactions that already were
approved by the state currency agency.
Venezuela's government has had strict currency
exchange controls since 2003 and maintains a fixed,
government-set exchange rate. Under the controls,
people and businesses must apply to a government
currency agency to receive dollars at the official rate
to import goods, pay for travel or cover other
obligations.
While those controls have restricted the amounts of
dollars available at the official rate, an illegal black
market has flourished and the value of the bolivar has
recently been eroding. In black market street trading,
dollars have recently been selling for more than four
times the official exchange rate of 4.30 bolivars to
the dollar.
The announcement came after the country's Central
Bank said annual inflation rose to 22.2 percent in
January, up from 20.1 percent at the end of 2012.
The oil-exporting country, a member of OPEC, has
consistently had Latin America's highest officially
acknowledged inflation rates in recent years. Spiraling
prices have come amid worsening shortages of some
staple foods, such as cornmeal, chicken and sugar.
Seeking to confront such shortages, the government
last week announced plans to have the state oil
company turn over more of its earnings in dollars to
the Central Bank while reducing the amount injected
into a fund used for various government programs
and public works projects.
Giordani said the government had also decided to do
away with a second-tier rate that has hovered around
5.30 bolivars to the dollar, through a bond market
administered by the Central Bank. That rate had been
granted to some businesses that hadn't been able to
obtain dollars at the official rate.
It was the fifth time that Chavez's government has
devalued the currency since establishing the currency
exchange controls a decade ago in an attempt to
combat capital flight.
Venezuela's government announced Friday that it is
devaluing the country's currency, a long-anticipated
change expected to push up prices in the heavily
import-reliant economy.
Officials said the fixed exchange rate is changing
from 4.30 bolivars to the dollar to 6.30 bolivars to
the dollar.
The devaluation had been widely expected by
analysts in recent months, though experts had been
unsure about whether the government would act
while President Hugo Chavez remained out of sight in
Cuba recovering from cancer surgery.
It was the first devaluation to be announced by
Chavez's government since 2010, and it brought
down the official value of the bolivar by 46.5 percent
against the dollar. By boosting the bolivar value of
Venezuela's dollar-denominated oil sales, the change
is expected to help alleviate a difficult budget outlook
for the government, which has turned increasingly to
borrowing to meet its spending obligations.
Planning and Finance Minister Jorge Giordani said the
new rate will take effect Wednesday, after a two-day
banking holiday. He said the old rate would still be
allowed for some transactions that already were
approved by the state currency agency.
Venezuela's government has had strict currency
exchange controls since 2003 and maintains a fixed,
government-set exchange rate. Under the controls,
people and businesses must apply to a government
currency agency to receive dollars at the official rate
to import goods, pay for travel or cover other
obligations.
While those controls have restricted the amounts of
dollars available at the official rate, an illegal black
market has flourished and the value of the bolivar has
recently been eroding. In black market street trading,
dollars have recently been selling for more than four
times the official exchange rate of 4.30 bolivars to
the dollar.
The announcement came after the country's Central
Bank said annual inflation rose to 22.2 percent in
January, up from 20.1 percent at the end of 2012.
The oil-exporting country, a member of OPEC, has
consistently had Latin America's highest officially
acknowledged inflation rates in recent years. Spiraling
prices have come amid worsening shortages of some
staple foods, such as cornmeal, chicken and sugar.
Seeking to confront such shortages, the government
last week announced plans to have the state oil
company turn over more of its earnings in dollars to
the Central Bank while reducing the amount injected
into a fund used for various government programs
and public works projects.
Giordani said the government had also decided to do
away with a second-tier rate that has hovered around
5.30 bolivars to the dollar, through a bond market
administered by the Central Bank. That rate had been
granted to some businesses that hadn't been able to
obtain dollars at the official rate.
It was the fifth time that Chavez's government has
devalued the currency since establishing the currency
exchange controls a decade ago in an attempt to
combat capital flight.
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