U.S. Dollar Skyrockets in Venezuela's Black Market
Hugo Chavez's attempts to distort the Venezuelan economy is starting to cause some absurd effects.
The central bank is selling fewer dollars on the Sitme (the Venezuelan exchange) system at a rate of 5.3 bolivars per U.S. dollar to limit its losses. However, it certainly cannot stifle demand for foreign currencies.
“The decision to reduce the supply of dollars on the Sitme is deliberate and is part of a transition,” said Luis Vicente Leon, president of Caracas-based polling company Datanalisis.
Weak demand for bolivars, soaring inflation above 20% and widespread price controls are steadily making it impossible to run a business that depends on any kind of imports.
Hugo Chavez has already devalued the bolivar four times since 2003. A fifth devaluation is widely expected shortly after regional elections next month.
"It is difficult to gauge what is ultimately a political decision, though authorities cannot ignore what are becoming acute macro imbalances," said New York analyst Siobhan Morgan.
The country will likely weaken the official rate 31% to 6.2 bolivars per dollar, according to the median estimate of 14 analysts in a Bloomberg survey published in August.
Until then, hoarding and insatiable demand will continue to keep the U.S. dollar value in the country sky-high.+10
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