Venezuela Devalues
Bolivar, Establishes Dual Exchange Rate
CARACAS - Venezuela devalued on Friday the
official exchange rate of the Bolivar
currency for the first time since March
2005, and created a second exchange rate for
non-essential imports, to stimulate exports
and close a fiscal deficit.
President Hugo Chavez said that the Bolivar
would be devalued to 2.60 per US dollar from
2.15 per US dollar and a second exchange
rate, known as the “oil dollar,” will be
pegged at 4.3 per US dollar for
non-essential imports. The unregulated
currency market will be “intervened” in by
the central bank to control the rate, he
said.
“This is to boost the productive economy, to
reduce imports that aren’t strictly
necessary and to stimulate exports” Chavez
said in comments on state television. “We
need to stop being a country that only
exports oil.”
Chavez said that imports of health related
products, food, machinery, books,
technological instruments, public sector
purchases and remittances will be subject to
the 2.60 Bolivares to the US dollar rate.
However items such as cars,
telecommunications, tobacco and beverage,
chemical, petrochemical or electronic gear
will have to pay the US dollar, 4.30
Bolivares.
The government will receive more Bolivares
per dollar from oil exports through the
devaluation while trying to keep a lid on
inflation that closed the year at almost
27%, among the highest annual rates of the
world.
Venezuela, the largest oil producer in South
America and a founding member of the
Organization of Petroleum Exporting
Countries, fell into recession in 2009, its
first in six years, after oil revenue, oil
production and manufacturing plunged.
The government, which restricted foreign
currency trading in January 2003 following a
two-month general strike intended to oust
Chavez from power, last devalued the
currency about 11% in March 2005. The
Bolivar was also devalued in 2004
Analysts say Venezuela's stagflation,
soaring prices despite a slump in economic
activity, spells a difficult 2010 for
President Hugo Chavez's government with a
legislative elections looming in September.
The government is expected to spend heavily
ahead of the vote to combat an opposition
push to slash or overturn the socialist
leader's control of the National Assembly.
Venezuela's 2009 inflation was lower than
the 2008 figure of 30.9% and the monthly
rate eased to 1.7% in December, down from
1.9% in November, according to a Central
bank release. December rate was the lowest
since March 2009 and down from 2.6% in
December of 2008.
Goods and services led the rises at 3.2% in
December, while food and drinks were up
1.6%. Education services had the smallest
rise, at 0.2%.
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