TheState
01-08-2010, 11:02 PM
Link (http://news.yahoo.com/s/ap/20100109/ap_on_bi_ge/lt_venezuela_currency;_ylt=AgjOHd5hXByyKhosbgRE9dO s0NUE;_ylu=X3oDMTNwdW1iZHQ5BGFzc2V0A2FwLzIwMTAwMTA 5L2x0X3ZlbmV6dWVsYV9jdXJyZW5jeQRjY29kZQNtb3N0cG9wd WxhcgRjcG9zAzcEcG9zAzQEcHQDaG9tZV9jb2tlBHNlYwN5bl9 oZWFkbGluZV9saXN0BHNsawN2ZW5lenVlbGFkZXY-)
Chavez said the bolivar will now have two government-set rates: 2.60 to the dollar for transactions deemed priorities by the government, and 4.30 to the dollar for other transactions. The devaluation dropped the currency's value by 17 percent or 50 percent, depending on the tier.
Economist Pedro Palma, founder of the Caracas consulting firm MetroEconomica, said the government was forced to accept that such a large disparity between the official exchange rate and the parallel trading rate was no longer viable.
"Inflation is going to shoot up, but it's a necessity to correct a tremendous accumulated imbalance," Palma said. "I think what the government has had to accept is that the currency distortion can't be sustained anymore. It's absurd."
Chavez said the bolivar will now have two government-set rates: 2.60 to the dollar for transactions deemed priorities by the government, and 4.30 to the dollar for other transactions. The devaluation dropped the currency's value by 17 percent or 50 percent, depending on the tier.
Economist Pedro Palma, founder of the Caracas consulting firm MetroEconomica, said the government was forced to accept that such a large disparity between the official exchange rate and the parallel trading rate was no longer viable.
"Inflation is going to shoot up, but it's a necessity to correct a tremendous accumulated imbalance," Palma said. "I think what the government has had to accept is that the currency distortion can't be sustained anymore. It's absurd."