September 28, 2022

EXPO Magazine

Complete News World

The dollar is rising in Venezuela

Dollar rises again in Venezuela In the past five days, the bolivar has lost a fifth of its value against the US currency, raising alarm bells in the inflationary country.

The official rate rose from 6.18 bolivars to the dollar last Monday to 7.85 bolivars today, devaluing the national currency by 21.07%.

The price on the parallel market — a note amid exchange controls in place since 2003 — crossed the barrier of 9 bolivars per dollar yesterday, retreating in recent hours after “transaction intervention” as the central bank calls for currency injections. A market created by the state to regulate tariffs.

Retiree Soleida Romero, 72, felt a hit in her pocket. “It’s all too expensive. To cry,” he lamented.

After depreciating the bolivar by 76% in 2021 and more than 95% each year between 2018 and 2020, President Nicolás Maduro’s government has maintained some stability in rates in recent months by continuing to pump foreign currency into banks.

Although Venezuela still suffers from some of the world’s highest inflation, price growth has slowed in an economy where the dollar began to circulate freely in 2019 after 15 years.

Venezuela’s inflation was 48.4% in the first half, the country’s central bank (BCV) said. It is 130,000% in 2018, 9,585% in 2019, 3,000% in 2020 and 686% in 2021. A rise in the dollar creates anxiety as Venezuelans seek a safe haven for their money, increasing demand for foreign exchange.

“It’s a self-fulfilling prophecy”, commented Professor José Manuel Puente of the Institute of Advanced Management Studies (ISA): “I buy dollars because the bolivar will depreciate, because I buy dollars it’s a depreciation.”

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– More bolivars, less dollars –

Experts differ. The government last week honored labor obligations that had expired after mass protests by civil servants, but it did so by issuing bolivars, which, in turn, reduced its supply of dollars in the foreign exchange market. The allocation of foreign exchange to banks has also changed, with auctions instead of direct shares for sale.

“There was an expansion of the monetary base, which coincided with a change in policy”, pointed out Henkel García, director of Albusdata. The index, which includes the mass of bolivars in circulation and the central bank’s reserves, rose 36.2% last week.

– Overestimation –

Experts such as José Manuel Puente believe that the rates are “artificially pegged”, with an overvaluation of the bolivar that will, sooner or later, translate into a fixed exchange rate.

The situation has led to a sharp rise in the value of the dollar to 40% in 2021 and 34% in the first half of 2022, the consultancy Ecoanalitica estimates.

Without disclosing values, BCV admitted it had made 40 “interventions” this year. According to Puente, this was possible due to the “petrodollar cannon shot” resulting from the increase in crude oil prices due to the war in Ukraine, despite the crisis in the Venezuelan oil sector, whose production is 700,000 barrels per day, five times less than 15 years ago.