Authors:
José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net
On January 8, the Chavez government announced a devaluation of 21% -the bolivar goes from 2.15 to 2.60 per dollar- on the official currency to import food, medicine and some basic services. While the devaluation will be of 100% -the bolivar goes from 2.15 to 4.30 per dollar- on the official currency for trade and industry. Similarly, Chavez announced the liquidation of 25% of the Venezuelan international reserves to be transformed into public spending.
The consequences of these measures will be colossal as the shock of the devaluation will impact especially on a steep rise in prices of goods and services consumed by Venezuelans; at the same time, the official exchange rate moves to a dual mode that complicate still more the procedures and allocation of dollars to the citizens. Moreover, the consumption of a quarter of the country's international reserves by the government is a blow that removes more confidence from the national currency, and shows us that the government's finances are so bad that it is eating the nation's savings.
In regard to the parallel market, the two measures in the long run will be magnified in the unofficial price of the dollar, which will cause even more inflation. But worst of all is that the government's adjustments do not end here, the country's severe economic crisis provoked by Chavez, and the government mismanagement of the public resources, will force the regime to appeal to maxi-devaluations that will try to balance the accounts of the XXI century socialism.
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