Girish Gupta

HOME

PHOTOS

ONLINE

Twitter
Instagram
IFTTT
Facebook
LinkedIn
Keybase
GitHub

BY COUNTRY

Brazil
Colombia
Cuba
Ecuador
Egypt
Guyana
Iraq
Jordan
Lebanon
Mexico
United Kingdom
Venezuela

BY MEDIUM

Text
Photo
Radio
TV/Video

BY PUBLISHER

Al Jazeera
BBC
BuzzFeed
CBC
Christian Science Monitor
CNN
Daily Mail
Datum
Ecologist
Economist Intelligence Unit
Emerging Markets
Financial Times
Foreign Policy
France 24
Fusion
GlobalPost
Guardian
Independent
La Prensa (Panama)
LatinFinance
Mancunion
Monocle
National (Abu Dhabi)
New Internationalist
New Statesman
New York Times
New Yorker
NPR
PBS
PRI
Radio France Internationale
Reuters
RTE
Sky News
Sun
Sunday Times
Telegraph
TIME
Times of London
USA Today
Vice
WLRN

ABOUT

About
CV
Contact (PGP Key)
Minor economic reforms are unveiled
Jan. 22, 2015 — Caracas, Venezuela

Published by Economist Intelligence Unit

Event

In response to deepening economic problems, Venezuela's complex foreign-exchange system is set to undergo minor reform. The country is also being prepared for a rise in petrol prices, currently the world's lowest.

Analysis

The policy changes and data were announced by the president, Nicolás Maduro, in an annual speech to the National Assembly on Wednesday. In the address, the president admitted that Venezuela's economy was in trouble, although he attributed much of the blame to an "economic war" against his government, adding that the US was using oil as a geopolitical weapon. Falling oil prices have severely impacted Venezuela, which relies on oil earnings for virtually all of its export revenue.

Venezuela's strongest exchange rate of BsF6.3:US$1 will remain in place for essential food and medicine. The country faces severe shortages of basic goods, and many importers say they are unable to obtain hard currency at this rate. The two further exchange rates, BsF12:US$1 and BsF52:US$1, known as Sicad I and Sicad II respectively, are to be merged; it is not known yet at what rate. A third exchange rate mechanism will also be added, in which hard currency will be provided by private brokers. This is likely to be closer to the black-market exchange rate of BsF177:US$1. The changes essentially represent a devaluation of the currency, allowing the government more local currency for its oil sales.

Mr Maduro, in a speech that was in part antagonistic towards the opposition and the US, and in part apologetic for the state of the economy, also admitted that petrol prices needed to rise. Venezuelans currently pay around two cents per litre. The opportunity cost to the government is some US$12bn per year. No concrete timeline was offered, although it appears that Mr Maduro is looking to increase prices this year.

This and other more pragmatic changes are politically very difficult for a president whose approval ratings are around 22% and falling. When the government last tried to raise petrol prices, in 1989, thousands took to the streets. There are pockets of unrest similar to those seen last February, and they are likely to grow as supermarket lines and other manifestations of the poor economy worsen.

Impact on the forecast

While the changes are significant, they are nowhere near enough to allay a deepening of the recession. Given the recent downgrade to our oil price forecast, we will be revising our GDP predictions for Venezuela downwards.

Filed from
Caracas, Venezuela






More...

Exclusive: At least 123 Venezuelan soldiers detained since protests - documents
Jul. 6, 2017


Venezuela hikes minimum wage 50 percent, effectively down 17 percent
Jul. 2, 2017


Venezuela movie actor behind helicopter attack on government buildings
Jun. 28, 2017


Fourteen Venezuelan army officers jailed in first week of protests - documents
Jun. 6, 2017


Exclusive: U.S. considers possible sanctions against Venezuela oil sector - officials
Jun. 4, 2017


Exclusive: Trump administration concerned about U.S. firms giving financial 'lifeline' to Venezuela
Jun. 4, 2017


United Airlines ends flights to Venezuela, further isolating country
Jun. 3, 2017


Venezuela sets new exchange mechanism, as currency continues to slide
May. 24, 2017


Exclusive: Venezuela holds 5,000 Russian surface-to-air MANPADS missiles
May. 22, 2017


Venezuelan opposition activists march to Leopoldo Lopez' jail
Apr. 28, 2017


Venezuela says inflation 274 percent last year, economists say far higher
Apr. 20, 2017


Venezuelan protests against government leave three dead
Apr. 19, 2017


Venezuelans return to streets, roused by ban on opposition leader
Apr. 8, 2017


Venezuelan opposition, security forces clash in anti-Maduro protests
Apr. 6, 2017


Venezuela security forces battle anti-Maduro protesters
Apr. 4, 2017








© Girish Gupta