Luis Alberto López Rafaschieri and José Alberto López Rafaschieri
www.morochos.net
A major international bank is predicting a devaluation of the Venezuelan exchange rate in the first quarter of 2011. According to experts at Barclays Capital, the measure represents the best option for a government that will eventually be forced to balance its accounts. But leaving aside the speculations that may generate the report of the financial institution, the factors that Chavez should evaluate if he is planning a devaluation in the coming year are complicated.
A modification of the official exchange rate in 2011 would find justification in the long socialist recession that persists in Venezuela, the government deficit, the growing debts to government employees, the debt on the secondary market, the low tax collection due to the economic downturn , the oil price that has not returned to exceed $100 per barrel, and the 2012 elections which are relatively far away to absorb an impact of this nature and allow time for Chavez to regain some stability.
Unfortunately for the Venezuelan president, the 100% maxi-devaluation the government decreed in January 2010 is very recent, so launching a new macroeconomic shock could mean a trauma that is too close to the previous one, for the economy that has registered South America's worst performance in the past 3 years.
Furthermore, although PDVSA's lucrative exports have declined and the Chavez government has failed to manage it properly, the global oil market continues to live the most spectacular boom in its history, which produces a good income for an OPEC country like Venezuela. The current barrel is not worth the $140 he reached in 2008, but remains above $70, fairly high compared to the average of $36 per barrel from 1970 to 2008.
Also, from 2008 to 2010, Venezuela's economic conditions have deteriorated more than in any other year of the Chavez government, which, among other things, has adversely affected his popularity, lowering it to alarming levels for a populist leader. How do a new large devaluation would impact on this weak leadership? It's hard to believe it would be good, although missing 24 months for the 2012 elections.
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