Chavez Says He ‘Revalued’ Bolivar With Parallel Gains (Update1)
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By Daniel Cancel
Jan. 15 (Bloomberg) -- Venezuelan President Hugo Chavez said that he has “revalued” the country’s currency, not devalued it, after strengthening the value of the bolivar 10 percent in the so-called parallel market since announcing the first devaluation in 5 years.
Chavez said that the government will strengthen the parallel rate to 4.3 per dollar as part of a “strong intervention” by the central bank by selling dollars to the local market to meet demand for foreign currency. The bolivar traded at 5.87 today, traders said.
Chavez devalued the bolivar as much as 50 percent on Jan. 8 and implemented a multi-tiered exchange system to prevent dollar outflows and close a growing budget deficit. Imports deemed essential goods will receive an exchange rate of 2.6 bolivars per dollar and nonessential goods will receive 4.3 per dollar.
“If we take into account that the majority of prices were set at the parallel market and we’re now going to strongly intervene in that market, a lot of prices should actually go down,” he said during a speech to announce the government’s achievements of 2009. “From that point of view, we’ve actually revalued the bolivar, a true revaluing of the currency, not devaluation.”
The central bank sold $100 million of 90-day zero-coupon local bonds this week at a price of 116.25 percent to bolster the currency in the parallel market. The operation gives investors an implicit exchange rate of 5 bolivars per dollar.
Venezuelans turn to the parallel currency market when they can’t get government permission to buy dollars at the official rate.
Venezuela, the largest oil producer in South America, slashed dollar sales last year after oil revenue plunged in a bid to save international reserves, pushing companies to import at the parallel rate. Venezuela’s official rate had remained unchanged at 2.15 since 2005.
Chavez said that the central bank’s dollar sales will push prices down from last year and prevent inflationary pressures from the devaluation since importers will be able to access lower exchanges rates to import goods.
Venezuelan consumer prices rose 27 percent last year, the highest annual inflation rate among 78 economies tracked by Bloomberg News. RBS Securities Inc. forecasts inflation to quicken to 40 percent this year following the devaluation.
Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Daniel Cancel
Jan. 15 (Bloomberg) -- Venezuelan President Hugo Chavez said that he has “revalued” the country’s currency, not devalued it, after strengthening the value of the bolivar 10 percent in the so-called parallel market since announcing the first devaluation in 5 years.
Chavez said that the government will strengthen the parallel rate to 4.3 per dollar as part of a “strong intervention” by the central bank by selling dollars to the local market to meet demand for foreign currency. The bolivar traded at 5.87 today, traders said.
Chavez devalued the bolivar as much as 50 percent on Jan. 8 and implemented a multi-tiered exchange system to prevent dollar outflows and close a growing budget deficit. Imports deemed essential goods will receive an exchange rate of 2.6 bolivars per dollar and nonessential goods will receive 4.3 per dollar.
“If we take into account that the majority of prices were set at the parallel market and we’re now going to strongly intervene in that market, a lot of prices should actually go down,” he said during a speech to announce the government’s achievements of 2009. “From that point of view, we’ve actually revalued the bolivar, a true revaluing of the currency, not devaluation.”
The central bank sold $100 million of 90-day zero-coupon local bonds this week at a price of 116.25 percent to bolster the currency in the parallel market. The operation gives investors an implicit exchange rate of 5 bolivars per dollar.
Venezuelans turn to the parallel currency market when they can’t get government permission to buy dollars at the official rate.
Venezuela, the largest oil producer in South America, slashed dollar sales last year after oil revenue plunged in a bid to save international reserves, pushing companies to import at the parallel rate. Venezuela’s official rate had remained unchanged at 2.15 since 2005.
Chavez said that the central bank’s dollar sales will push prices down from last year and prevent inflationary pressures from the devaluation since importers will be able to access lower exchanges rates to import goods.
Venezuelan consumer prices rose 27 percent last year, the highest annual inflation rate among 78 economies tracked by Bloomberg News. RBS Securities Inc. forecasts inflation to quicken to 40 percent this year following the devaluation.