Panic buyers thronged Venezuelan shops over the carnival weekend after the government of Hugo Chávez announced a surprise devaluation that analysts said was overdue but would only partly right the listing economy.
Domestic appliances such as fridges and cookers were in particularly high demand as Venezuelans snapped up goods imported at the now defunct exchange rate of 4.3 bolívars per dollar. From now on they will be imported at 6.3 bolívars per dollar.
... Critics say that although the exchange rate adjustment was essential to correct growing distortions in the economy, it did not go far enough as the currency remains overvalued. It will therefore fail to solve the fundamental problem that the demand for dollars will remain far greater than the amount the government is likely to supply, they argue.
“Either the government burns up huge quantities of its [foreign currency] reserves handing out cheap dollars, or there will be shortages,” said Luis Vicente Léon, a pollster and economist at Datanalisis.
Local economists estimate that the “equilibrium” exchange rate, at which foreign currency is no longer relatively cheap for Venezuelans, is about nine bolívars to the dollar.
“The big winner ends up being the state,” said Asdrúbal Oliveros, an economist at the Caracas-based consultancy Ecoanalitica. The move will relieve pressure on a fiscal deficit variously estimated between 7 and 15 per cent of gross domestic product, by increasing the state’s net revenues by almost 4 per cent of GDP, or $13bn at the new exchange rate, according to Mr Oliveros.
The devaluation also cuts the dollar value of domestic debt from $42.9bn to $29.3bn, leading analysts to expect an increase in prices of Venezuela’s foreign debt.
But while the government gains, most Venezuelans lose out, with Ecoanalitica estimating an 8 per cent fall in consumers’ purchasing power. ...