Venezuela: Making change

Mar 1, 2013

Despite devaluing the bolívar in February, Venezuela’s chronic dollar shortage continues. Another devaluation may well be on the cards

By Girish Gupta

Venezuela’s financial woes are plain to see on arrival at Caracas’ Maiquetía international airport. Hawkers vie for hard currency, offering more than three times the official exchange rate of 6.3 bolívares fuertes (VEF) per US dollar.

But it’s not only the hawkers who are after foreign currency. Venezuela’s government faces a severe shortage of dollars.

In February, Venezuelan authorities devalued the bolívar fuerte by 31.7% to bring down a budget deficit that had been forecast by analysts at more than 9% of GDP this year. But the concern is that the action will do little to meet growing demand for hard currency to pay for imported goods – and could stoke yet more inflation, already at rates of over 20%.

"It’s very worrying that with oil at over $100, the country hasn’t managed to put in order its fiscal situation in a very...

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