Wednesday, November 6, 2013

Stagflación

Ah, the good ol' días. Relive them in Venezuela next year;
Tamara Herrera, the director of think tank Síntesis Financiera forecast that in 2014 the Venezuelan economy would shrink by 2.5%, along with a skyrocketing inflation rate of 51.8%.
...Herrera pointed out that private consumption would also record a negative performance, as it is expected to decline by 3.6%.
Which should allow some fun and games with foreign exchange;
According to Herrera, the Foreign Exchange Administration Commission (Cadivi) would sell foreign currency at two different exchange rates: at VEB 6.30 per US dollar, for basic imports; and at VEB 12 per US dollar for the remaining items. In addition, an ancillary foreign exchange market would be put in place, in which there would be more freedom to buy foreign currency, but at a foreign exchange rate of about VEB 25 per US dollar.
Uno, dos, tres...no? Hace las matemáticas;
The weighted average exchange rate for private imports would stand at about VEB 11 per US dollar. Therefore, the Venezuelan legal tender, the bolivar, would be devaluated by 83%.
Despite this serious adjustment, the bolivar will continue to be overvalued by 62%. 
Iow, it will get worse.

No comments:

Post a Comment