Luis Alberto López Rafaschieri and José Alberto López Rafaschieri
www.morochos.net
Since chavistas removed, in May, the way to buy dollars through stock brokers, we've heard rumors that Chavez would relax currency controls due to the upcoming election and the shortages of certain food items. But given the realities described below, we are inclined to think the government has in mind something different.
The exchange rate controls are for chavismo a domination mechanism, perfect to reward allies and punish enemies. Plus, it's wonderfully useful to weaken the big companies that have not been socialized.
Moreover, Chavez don't has the same amount of international reserves than before, which, among other things, prevent the government from burning dollars, as in the past years, through ridiculous semiannual bond issues -purchased with bolivares but sold for foreign currencies-.
We must also take into account the relationship between some chavista businessmen and the subsidized dollars, of which there is no need to say much...
Additionally, it's necessary to talk about the Cubans in Venezuela. We should recall that the free exchange of foreign currency does not exist in Cuba, the country that supply the chavismo's most important advisors and Hugo Chavez's ideological inspiration. On the island of Castro, the control over the currency is used as a method of subjection and economic decisions are based in primitive socialist notions, according to which, if paralyzing controls are imposed on the private sector, the fullness of economic anomalies are corrected. Ideas that have found influential fans in Venezuela.
All of which leads us to conclude that it is quite difficult that Chavez will soften his exchange rate policy in the near future. In fact, this scenario seems unlikely before, after the September election, or even in the next two years.
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