Authors:
Luis Alberto López Rafaschieri and José Alberto López Rafaschieri
www.morochos.net
No, it is not an idea from a parallel universe, is from Chavez: He is trying to enact a maxi-devaluation without increasing prices. That is, the Chavez government diminishes the value of the object that pays for goods and services in Venezuela, but expects the same purchasing power as before for this devalued currency.
Unfortunately for Chavez, although now the government wants to throw the blame on retailers, the market has its own rules. A devaluation almost always causes a general rise in prices, more so if it is a maxi-devaluation of 100% -not to mention what happens in the black market- and even worse if we talk about a country like Venezuela, which imports 80% of what it consumes.
Prices will rise, no matter whether Chavez agrees or not. The government may fine/expropriate retailers to intimidate them, but sooner or later the facts will have to be faced; just as happened in the fight between the black market dollar vs. CADIVI's dollar, where the wishes of the government were not sufficient to contain reality.
Before Chavez's black Friday, the expected rate of inflation for 2010 in Venezuela was 30%, but after the maxi-devaluation of the bolivar, inflation is now projected to climb above 50%.
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