The Venezuelan government devalued the Bolivar two days ago. There was until then a fixed rate of Bs 2.1 per dollar. Now the government has set up a fixed dual system where imports for health and some other areas get a dollar at Bs. 2.6 and the rest at Bs 4.3
I wrote an article in Spanish here. I won't translate it, but here is some of what I wrote:
1) Venezuelans have practiced a cargo cult for many decades now, thinking their many imported gadgets are well deserved without thinking how much real value they have produced to get those gadgets, they haven't changed a wee bit
2) I have pleaded for years for the government to devalue the currency as the fixed value it had was too much, it was really killing the export sector and favouring the rich
3) I think the government acts way too late and without comprehensive plan. The government does not have a real project, it is just using the "as we go" way of management.
4) The government has not clarified whether exporters will be able to get sell their gained dollars at 3.6 (which is the way to go)
5) The government has just doubled the amount of bolívars it has for the Parliamentary campaign of 2010
And then:
6) the opposition has shown a ghastly response, with most spokespersons just talking about the incoming inflation and their horror that their travels abroad will be now much more expensive. Nobody has had the courage to say the Bolivar was very overvalued because nobody wanted to annoy their peers, who have been profiting from cheap travels abroad and nice flat TV screens that costs less than in any place in the world.
The inflation will go up, but as Quico said, the currency change is not the main factor to affect inflation this year. We will again have the highest inflation in the Western hemisphere and I am sure it will be over the 25% of last year (mind: in the middle of a recession).
I believe chavismo will now use the extra cash (it has nearly doubled the amount of local money) to massively import food and other goodies from Europe, from Argentina and Brazil and give it away at very low prices so that it can maximize its votes in September. I doubt very much there will be a real plan to use that money for sustainable development. I doubt the regime will use the opportunity to really promote the exporting industry, even if Hugo is just discovering the importance to get off the oil dependency, something I thought most of us learnt during primary school time. If we started to have a burgeoning exporting sector, chavismo would lose some power and that is something it definitely does not want. The Venezuelan regime does not want to be depending on exporters as the Kirchner mafia is in Argentina.
Meanwhile, most opposition leaders will be acting - a real tragedy - without cojones, just complaining about the government's mismanagement (they are right there), about the fact imports will be now very high, about the way the government improvises, but they will be unable to talk honestly to the people and say Venezuelans do need to make sacrificies. They will be unable to put forward a plan.
And while that is happening:
- The INE says 44.8% of the working force is active in the informal sectors. Basically, most of them are selling each other chinese toys and Peruvian panties, while the rest are cooking cachapas and empanadas for us all.
- Spain reports that Venezuelans are, after Paraguayans and Brazilians, the Latin Americans who are most likely to be rejected at immigration and sent back to their country. Venezuelans don't need a visa to visit the Shengen region, but some arrive without sufficient funds. This comes amid increased controls due to the worsened economic situation in Spain. Venezuela was a net importer of economic refugees from Spain for many decades. Since the eighties things changed and more and more Venezuelans have been leaving for Europe. 1338 out of 8200 persons with a Venezuelan passport were prevented from entering Spain in 2009. Of course, we know many thousand Venezuelans enter Spain with their Spanish passes, mostly people whose parents or grandparents were Spanish immigrants to Venezuela. This is a sad development and shows how more Venezuelans want to leave their country.
More than one in eight is sent back