Caracas, August 25, 2022 (OrinocoTribune.com)—The black market currency exchange rate in Venezuela has gone wild this week, starting with 6.95 bolívars per US dollar on Monday and by the end of Thursday, August 25, closing at 9.33, representing a devaluation of 34.2% in just four days. It is feared that it will cross the 10 bolívars per dollar barrier this Friday.
Since the second half of August a bigger gap between the official exchange rate published by the Central Bank of Venezuela (BCV) and the black market referent, usually reported by the @enparalelovzla and @enparalelovzla3 Instagram accounts—the first one out of service since Thursday morning, has widened from 3.3% on the afternoon of August 15 (6.18 vs. 5.98) to 33.09% this Thursday (7.01 vs. 9.33).
This unusual jump in the price of the US dollar—not seen for over a year in Venezuela—has revived tensions between retailers and buyers. The retailers are trying to figure out what will be the right price to set in dollars as the official BCV exchange rate is the one enforced by authorities to measure how many bolívars have to be paid for an item, thus making even prices in dollars go beyond normal, as reported by some users on Twitter. Meanwhile the buyers are trying to get the prices right for items they need to buy, hence creating a tense environment. This forced many retailers to close operations earlier or begin operations later on Wednesday and Thursday, trying to figure out the best way to work in the complex situation.
Quiero denunciar a DAKA que de un día para otro subió toda la@mercancía en DÓLARES de 50 a 120$ pic.twitter.com/P5knFdnFj8
— Freddy Blondel (@Fbcz_ccs) August 26, 2022
Since 2019 prices in Venezuela are mostly marked in US dollars as a way to evade the disastrous effects of hyperinflation that reigned from 2017 to 2021. Venezuela officially exited the hyperinflation crisis in January 2022, after more than 12 months with monthly inflation below 50%. In this scenario a new sudden hike in the price of the dollar with a strong campaign to enforce the use of the official BCV rate to calculate how many bolívars are going to be needed to pay for goods and services, is the most significant element currently affecting commercial transactions in the country. That is, what is affecting the economy the most is the gap between official exchange rate and the black market exchange rate.
Experts of all kinds are trying to provide possible explanations for the causes of the current situation. Most are trying to circulate the following theories, with which we also provide some counter analysis:
- Failed socialist policies and the lack of a real economic policy. The Communist Party of Venezuela (PCV) and some leftists along with some mainstream media denounce President Maduro for being neoliberal.
- An increased flow of cash in the economy as result of recent adjusted payments of vacation bonuses for public sector workers. This theory has been discarded by some neoliberal economists not sympathetic to the government, such as José Guerra. This also goes against the constant claims of ultra-left economists like Pascualina Curcio, Tony Boza and Juan Carlos Valdez—economic advisers during the economic crisis years from 2011 until 2018—who insist that the Venezuelan government is wrongfully applying an unnecessary monetary discipline policy.
- Another group criticizes the government for not doing enough to keep the hike pressure in the exchange rate market at bay, while just a few days ago most of them were criticizing the recent stability in the exchange rate with the help of the BCV selling dollars to keep the rate at reasonable margins. However, a strong participation of the Central Bank in the exchange rate market at this moment will play to the interests of the capitalist class that will try to take away any dollar that the BCV injects into the market. It has been reported by right-wing economists that so far in 2022 the BCV has injected approximately $3 billion in the exchange rate market.
At the same time, a group of ultra-leftist economists is again pushing for the same price control policies that created the scarcity crisis that tremendously affected Venezuelans during 2012–2019, asking the government to enforce the law of just prices that was the legal framework for that erroneous policy. They also feel empowered to push more strongly for a relaxation of the monetary discipline that has improved the quality of life of a majority of Venezuelans in recent months.
One factor that has not been discussed enough by experts in this particular conjuncture is that the reopening of trade relations with Colombia might be taking its toll on the border exchange rate thus affecting the overall referent used by @monitordolarvzla. This would not be the first time that economic dynamics in Colombia, especially in the border area, might have an impact on the overall economic situation of Venezuela.
Si hubo conato de saqueos en el mercado pero se logró controlar la situación y caso todos los negocios en el centro de puerto la Cruz están cerrados ya que también intentaron saquear pic.twitter.com/3IjZjEodte
— Zuleida Cuiba (@ZCuiba) August 25, 2022
A few incidents of looting were reported in some parts of Venezuela, like in Puerto La Cruz where several such attempts were thwarted by law enforcement agencies, leading to the arrest of three persons and creating a tense situation. Most of the shops in the region remained closed around noon and there was the unusual presence of Bolivarian National Guard (GNB) agents.
Currency turmoil continues with the black market rate "awakening" w/ a further 4.4% devaluation and the Venezuelan Central Bank reportedly injecting a massive $200 million in currency exchange tables run by the banks pic.twitter.com/7wdZjIwZ1M
— venezuelanalysis.com (@venanalysis) August 25, 2022
Venezuelan News website Venezuelanalysis.com posted on its Twitter account a brief explanation of the incident with the following text: “Currency turmoil continues with the black market rate ‘awakening’ w/a further 4.4% devaluation and the Venezuelan Central Bank reportedly injecting a massive $200 million in currency exchange tables run by the banks.”
The black market exchange rate for January 3, 2022 was at 4.76 bolívars per dollar and the BCV rate was at 4.59, while on August 25, the devaluation in the official rate was at 52.7% and for the black market rate it was 96%.
Relevant authorities have not made any official statement yet, but many speculate that the government will allow the official exchange rate move closer to the black market one in order to avoid the distortions among economic factors. A second speculation is that the BCV will intervene strongly in the exchange rate market or force bankers to buy government bonds to drain liquidity from the economy, thus reducing the devaluation pressure. In this scenario the second option is the most viable as Venezuela’s foreign exchange income is still crippled due to the criminal US and European blockade.
Orinoco Tribune Special by staff
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