Authors:
Luis Alberto López Rafaschieri and José Alberto López Rafaschieri
www.morochos.net
The Chavez government has lately been showing concern about what is happening in the dollar black market. It has tried several strategies but there is no way to get people to stop buying dollars at the unofficial price, which progressively increase the gap between the legal and parallel rates.
Some advisers are recommending the government to recognize the unsubsidized dollar market, and to impose a special tax on the transactions made on that dollar. Unfortunately for the government, both this proposal and maintaining the current policy lead to unwanted consequences:
On the one hand, giving official recognition to the parallel exchange rate would automatically trigger the movement of hundreds of millions of bolivars towards that market, because people would be more confident in paying a price that was legitimized by the government. As a result, the new demand would greatly increase the dollar's value against the Venezuelan currency, which would elevate prices in a country dependent on imports.
But on the other hand, maintaining the fiction of the VEB/USD at 2.15 means continuing to spend billions to subsidize the currency, which is more difficult now that the Venezuelan government's budget is more strained. Besides keeping other problems generated by the current policy, such as frauds, inefficiency, delays and shortage.
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