President Hugo Chavez announced on Friday, almost clandestinely, the devaluation of the official exchange rate of 2, 15 for the so-called basic items such as food, health, etc. and including of course the public sector imports, remittances and foreign students to 2.60 and everything else to 4.30 BsF. dollar. Additionally, again recognized the existence of an alternative market which will involve the Central Bank to prevent speculation in it and the price to skyrocket.
The question one asks immediately. Was it necessary? Of course if the economy was crying out for four years. This did not come with the financial crisis of 2009, this is the result of wrong economic policies without going into technical detail, we have seen this movie four times already Venezuelans. At least I do in my 2 decades of experience professional I have seen that many times including this one.
any wonder? Not really. analyst Particularly as the first option considered by the strong political cost has, this story of the dual exchange already has more than a year and a half discussion in the corridors of Miraflores, but gave no numbers and now popular not just was inevitable.
In my opinion, the government not have to give all currencies required by the Venezuelan productive sector, makes the dollar a bit expensive to curb demand and take advantage of this devaluation to use the alternative market as a source of escape; there, the Central Bank can deliver the debt bonds repurchased in the past and PDVSA surplus not have to go through this control and thus not have to resort to structured notes or assignments to finger as the table has served to inject resources into the system and maintain say the exchange rate at 5.30 which implies a differential of 23 percent over the officer, not bad.
Bs With surplus, more money can be distributed on the street and keep people happy as to force, seek to impose price controls to prevent traders raise prices and that perhaps trade was not already selling the dollar to 10 BsF? An average shirt in a shopping center at U.S. $ 35 you get it for 350 BsF. Caracas How much is the dollar then?
This means that traders are not going to raise the price? No, if you will do because we have to preserve the replacement cost and on the other goods and services before getting to what they will pay 2.15 to 4.30. That is what the state does not want to happen because that would trigger inflation. Moreover if the state sells the dollars to 4.30 as mentioned earlier, would have more money in VEB, which would ultimately mean more inflation. It's worth a quick mention here that if price control is very strict, there may be shortages again then.
Is it bad then? Not necessarily, structural economists say a surprise devaluation has a negative impact the first year, but once companies to come together and produce more because their products are more competitive because they cost less in international markets, then from the second year could have a substantial improvement, which could even completely reverse the initial damage.
To achieve this, requires an export policy and especially the generation of trust, from the point purely economic view devaluation brings confidence, but after the Alo Presidente on Sunday 10 January, where the president threatened to expropriate merchants and other banks to intervene, please explain to me where is the trust?.
Moreover, the transfer of 7,000 million dollars in international reserves to Fonden is assumed as expressed by the president, who are to encourage export, the same explanation least I've heard a couple of times in the same party and to this day, there is no way to have a statement to explain in this fund was used. Again, trust and encouragement for whom?.
What to Expect Much uncertainty, it is possible that the bull market behaves as no spokesman for the State has indicated there will be availability of foreign exchange if the new price and also there is no indication if there are enough resources in the alternative market to meet demand, so that at least in the short term might expect a dollar more expensive, higher prices and some shortages.
In any case, there is still information we do not know and that the government should inform us, I mean the exchange policy will apply and that devaluation is a economic measure but not a policy that is how we will deliver the currency, what criteria he will use if and who is not. Whether there may be a surprise.
Until next issue ...
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