Venezuela Devalues Currency Again: Carnaval the Last Party

As Hugo Chavez reportedly abides in Cuba in some fashion, above or below ground or in a freezer, his presidency is once again wreaking havoc on the people. In 2010 Chavez devalued the bolivar by half, to 4.3 bolivars to the U.S. dollar, from 2.15. The new rate of 6.30 takes effect Wednesday, happily just after Carnaval…party hearty before the suffering accelerates. (for the latest on the dictator’s health, Fausta has it here)

Hugo Chavez, Mahmoud Ahmadinejad

Hugo Chavez, Mahmoud Ahmadinejad

While Iran places missile sites on Venezuelan ground and Cuban troops swarm the land, Venezuela implodes:

By boosting the bolivar value of Venezuela’s dollar-denominated oil sales, the change is expected to help ease a difficult budget outlook for the government, which has turned increasingly to borrowing to meet its spending obligations.

But analysts said the move would not be sufficient to end the government’s budget woes or balance the exchange rate with an overvalued currency. Economists predicted higher inflation and a likely continuation of shortages of some staple foods, such as cornmeal, chicken and sugar. Source: Reuters

In 2010, Reuters characterized the devaluation this way:

The devaluation is politically risky but means every dollar of oil revenue puts more bolivars in government coffers. That allows Chavez to lavish cash on social projects and fund salary increases ahead of parliamentary elections in September.

Opponents were quick to criticize the socialist, who a year ago promised the global financial crisis would not touch “a hair” of Venezuela’s economy. He announced the devaluation on Friday night during an important baseball game.

“By establishing the exchange rate at 4.3 bolivars per dollar, the quality of life for Venezuelans is automatically devalued since we now have half the money we had before,” said Caracas Mayor Antonio Ledezma, a Chavez opponent. Source

Zerohedge on the current Venezuelan devaluation:

And that, ladies and gents of Caracas, is how you just lost 46% of your purchasing power, unless of course your fiatwas in gold and silver, which just jumped by about 46%. And, in case there is confusion, this is in process, and coming soon to every “developed world” banana republic near you.

Annual inflation for 2012 in Venezuela was 20.1 percent, down from 25%-30% in 2009, but still one of the highest in Latin America.

Only one “opposition” television station remains and Venezuela now owns a stake in it. In 2007, the people were on the streets fighting for their free press. They lost.

CARACAS, Venezuela — Press freedom advocates Saturday came down hard on the Venezuelan government’s sanctions this week against Globovision, the country’s lone remaining opposition TV station, in what some described as officialdom’s latest attempt to squelch dissent and free speech.

The New York-based Human Rights Watch condemned the government’s order that Globovision cease transmitting video spots questioning the constitutionality of the government’s decision to grant an open-ended medical leave of absence to ailing President Hugo Chavez, who is being treated in Cuba following cancer surgery. He was to have been inaugurated Thursday for a fourth term, but the oath-taking has been put on indefinite hold.

Business from across the spectrum: oil, telecommunications, agricultural/farming, banking and finance, tourism have been nationalized. Two Hilton Hotels were stolen in 2009 – in the same year Chavez shutdown 8 banks in three weeks.

Two companies from my hometown of Tulsa have felt the socialist/communist hand swoop down and grab their business: Helmerich and Payne had 11 oil rigs seized in 2010 and a “major gas injection project” belonging to the Williams Companies was seized. Others include Owens Illinois, the largest glass container maker, a gold vein owned by gold Reserve Inc. This 2011 list of illegal seizure of business, nationalizations, is long, and likely not complete.

Shopping? In December 2009 Chavez announced Cosmerso, a “chain of government-run, cut-rate retail, selling everything from food to cars to clothing.” How does a clothing wholesaler compete with that?

CARACAS — President Hugo Chavez ordered Sunday the seizure of a French-owned retail chain on accusations that it raised prices after Venezuela devalued the currency by half….

AlmacenesExito saw some of its stores closed this week by government authorities on accusations that it was increasing prices regardless of Mr. Chavez’s orders that retailers were not to adjust prices after he devalued the currency to 4.3 bolivars per dollar from the previous rate of 2.15 bolivars….

Separately, Mr. Chavez also ordered the nationalization of a large shopping-mall recently built in a downtown district in Caracas. The stores controlled by Exito and the shopping mall will be used to build up Comerso, a new government-run retail chain which seeks to sell its products at “socialist” prices, according to the president. Source: WSJ

No doubt Chavez set the currency devaluation in motion before he headed back to Cuba two months ago, but hey, does it matter? The finance minister Jorge Giordani held up a document with Chavez’ signature at a “news” conference. See there…

Graphic credit: Reuters/Raheb Homavandi

  • It is a lot of fun living in Hugolandia. The black market exchange rate has been anticipating this devaluation and is now at 19.54 Bolivars to the dollar. The implicit value: i.e., the number of Bolivars in circulation divided by the hard currency reserves adjusted into dollars, is 24.5 Bolivars to the dollar. Many high ranking Chavistas have become billionaires by using their influence to buy dolars at the official rate and then sell them on the black market and then rebuying at the oficcial rate, and etc. until they have enough to add to their accounts in Panama or Switzerland. This is what Chavez calls his 21st Century Socialism and the masses think he is a god. Go figure!

    • Jim, I had forgotten you were there. I read about the black market exchange both yesterday and in 2010 but I didn’t understand it well enough to comment on it. Now I understand it with your explanation. Very interesting that Venezuelans see him as a “god.” I thought most people who were middle class and up didn’t see it that way. I thought he won by controlling everything and giving freebies to the poor.

      • The middle class is a fraction of what it was when I arrived here 1993. There are a lot of new millionaires and billionaires as a result of the coruption, however.