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Dr. Armand Hammer e-mail me




Official exchange rate of the bolivar fuerte vs. parallel rate


Petare-al-atardecer.jpg

On his article in early July, Miguel Salazar claims that the official exchange rate will suffer a modest devaluation from Bs.F 2.15 up to Bs.F 2.90 per U.S. dollar. It is laughable that this devaluation will only reach up to Bs. 2.90, but I suppose that such will be their limited action in order to try to simultaneously satisfy everyone, but at the end of the day no one will really have satisfaction.

During the initial five years of the exchange control regime the differential between the official exchange rate and the parallel exchange rate averaged below 100%. Nowadays this differential, regardless of an official exchange rate of either Bs.F. 2.15 or Bs.F 2.90 per U.S. dollar, easily exceeds 100%. It would be more correct to say that it would not consist in a devaluation but rather in a mitigation of the increasing trend of a sustained greater devaluation of the bolívar fuerte, in other words a technical rebound. If there were not a prohibition to publish the parallel exchange rate, I would gladly elaborate with charts, statistics and percentages, well supported with comparisons with the local inflation rate, international inflation rates, and the exchange rates of the Colombian peso and the euro against the U.S. dollar, how this absurd exchange rate situation has quantitavely devastated Venezuelan exports and has promoted unnecessary imports, to the detriment of the really needed imports that cannot take place. This only causes a chronic shortage of most goods and services.

The prohibition to publish the parallel exchange rate is, to my viewpoint, one of the worst features of the silencing laws, as we are not even able to quantify how deeply have we plunged, and we cannot even calculate realistic estimates on the number of years that must ellapse in order to revert the macroeconomic misadjustment. At least during previous exchange control regimes (RECADI – OTAC) it was possible to establish these sorts of projections with a certain degree of reliability.

Caracas, July 14, 2009

Rivero & Cooper, Inc.