Venezuela devaluates its currency

ei.sdraob

Rebelheart wrote: »

Yeah, thanks be to Jaysas that Irish judges are not not not appointed by the ruling party.

Next time you visit Ireland, let us show you around.

In the interim:

http://www.google.ie/#hl=ga&q=Judges+appointed+government&meta=cr%3DcountryIE&fp=3a2f2eca357d5e06

do FF tell the judges in Ireland how to judge :cool:

well thats what happens in Venezuela and worse there judges get jailed if the judgement doesn't agree with the dictator's policy

not only does he appoint them, but they get the stick for going against the grain

once again in Chavez's own words

the separation of powers weakens the state.

theres a reason why in all modern democracies judges (judicial) are separate from ruling politicians (executive)

ei.sdraob

chevy wrote: »

I was under the impression that they would effectively get twice as much for their oil now that they devalued.

no

their oil (and all the oil around the world) is currently paid for in US dollars

their currency is still pegged at a certain ratio to the US dollar

chevy

ei.sdraob wrote: »

no

their oil (and all the oil around the world) is currently paid for in US dollars

their currency is still pegged at a certain ratio to the US dollar

Yes but they have now two official exchange rates. Oil will still be sold at the old rate and this money will go twice as far as it used too.

Time Magazine

Heh, thanks Tyler.

How many scary ideas can you fit into one paragraph?

Government officials say their rationing plan should help the country reach May, when seasonal rains are predicted to return. But even Chavez concedes the situation is serious. His past efforts to solve the problem have included sending cloud-seeding planes to produce rain with the help of Cuba.

I count at least seven. The broader story, which has even more scary ideas, is here. It seems quite possible that over seventy percent of Venezuela could end up without electrical power, within a year.

On the brighter side, they've finally devalued the currency.

sceptre

Rebelheart wrote: »

As a general rule, I don't like to say nice things to people who happen to have a bit of power as mods, but in this case I've learnt something which I deem to be valuable so thanks, Sceptre.

Just keep the footnote I added in mind:D

ei.sdraob

chevy wrote: »

Yes but they have now two official exchange rates. Oil will still be sold at the old rate and this money will go twice as far as it used too.

wrong once again

oil is only traded on the world markets in US dollars

if they try to charge anything but the current rate measured in US$/barrel the customers simply shift to buying supplies from another location

some of Venezuela's oil is bartered with countries like Cuba who send doctors in return, but most of their oil is sold to US in US$
there are some other bartering agreements like China launching a satellite and building a railway in exchange for oil > http://online.wsj.com/article/SB126152693744102097.html

anything that has to be imported into that country is now overnight literary twice more expensive, anyone who was holding the local currency yesterday is poorer today, its that simple

anyways this whole thing is about helping Chavez and Chavez only

CARACAS--Venezuela's devaluation of its currency and the imposition of a dual-rate foreign exchange system will certainly give a short-term boost to the fiscal situation of President Hugo Chavez's government.

But doubts remain that the devaluation will meaningfully help those outside the government. Importers and exporters, foreign oil companies and others in Venezuela that have been battling the broken currency system for years are waiting to see how the new system will work in practice.

After all, they've been down this road before.

Since winning the presidency more than a decade ago, this is effectively the fourth devaluation under Chavez, suggesting the previous ones have failed to engender longer-term economic stability.

Normally, a weaker currency makes exports more cost-competitive abroad, and so would typically generate more sales to overseas clients. That helps a country's external accounts and economy.

But this dynamic doesn't much apply to Venezuela. The country never had a strong manufacturing sector, and has seen what there was of it shrivel sharply during Chavez's tenure, which has been marked by statist policies, including widespread nationalizations.

Venezuela's sales of oil, which are denominated in dollars, now account for more than 90% of exports. So total exports can hardly be expected to rise as a result of the devaluation.

Still, the government had to do something, given its high spending commitments and a rampant currency black market in which the dollar frequently fetched three times the official rate. That disparity generated inflation that ran at 27% last year, among the highest rates in the world.

The old system, in place for the past five years, was made up of an official rate that required hard-to-obtain government approval and a black market that was thriving but pseudo-legal.

With the stroke of a pen Friday night, President Hugo Chavez chopped in half the official value of Venezuela's bolivar currency, to VEF4.3 for $1. It had been held at VEF2.15 for $1 since 2005. A declared socialist, Chavez also decreed a special rate of VEF2.60 for $1 to apply to import purchases of "necessary" items the country is lacking, such as basic foods and medicine.

It's the VEF4.3 rate that will get the most scrutiny.

"How much currency will the government really make available to the markets at 4.3 (bolivars)?" asked Russ Dallen, a banking analyst at BBO Financial Services. "If the government doesn't supply a significant amount of dollars at 4.3, then companies that need access to foreign currency will still be forced to rely on the higher parallel market."

Whether the government provides all the dollars individuals and companies request at the VEF4.3 rate is, in large part, out of its hands. If oil prices continue to rise, the government should have no problem meeting demand.

But if crude prices trend back toward levels seen last year, firms may be just as frustrated trying to get the VEF4.3 rate as they were trying to get the VEF2.15 rate.

Venezuela's oil price averaged $57 a barrel last year from $86 in 2008.

http://online.wsj.com/article/BT-CO-20100110-702846.html?mod=WSJ_World_MIDDLEHeadlinesAmericas

chevy

Ok, i'm a bit confused here.

Quote from the BBC website:
"The bolivar, whose rate is set by government decree, will be devalued from its current rate of 2.15 to the US dollar to 2.60 for "priority" imports.

However, the bolivar will be worth 4.30 to the dollar, a 50% devaluation, for items considered non-essential."

This quote implies that money made from selling oil will now buy twice as much in Venzeuala as it did.

nesf

chevy wrote: »

This quote implies that money made from selling oil will now buy twice as much in Venzeuala as it did.

It doesn't! What it says is that you'll get twice as many pieces of paper (i.e. bolivars) per dollar of oil sold to the foreign market. The actual purchasing power of those pieces of paper will decrease because now there's more of them to go around so you won't be able to buy twice as much in Venezuela with your twice as many bits of paper due to inflation cause by devaluation.

nesf

Rebelheart wrote: »

Yeah, thanks be to Jaysas that Irish judges are not not not appointed by the ruling party.

Next time you visit Ireland, let us show you around.

In the interim:

http://www.google.ie/#hl=ga&q=Judges+appointed+government&meta=cr%3DcountryIE&fp=3a2f2eca357d5e06

Our ruling party can't remove judges it doesn't like though. Which is the crucial difference here. The ruling party appoints new judges but is restricted by law from interfering in the rest of the judicial machinery up to and including not being able to force them to take pay cuts.

Politicians appointing judges is fine so long as they can't remove ones they happen to disagree with. This ensures judicial independent which is absolutely crucial in any democracy.

SLUSK

nesf wrote: »

It doesn't! What it says is that you'll get twice as many pieces of paper (i.e. bolivars) per dollar of oil sold to the foreign market. The actual purchasing power of those pieces of paper will decrease because now there's more of them to go around so you won't be able to buy twice as much in Venezuela with your twice as many bits of paper due to inflation cause by devaluation.

Alot of people in the economics forum seem to think inflation is good.

nesf

SLUSK wrote: »

Alot of people in the economics forum seem to think inflation is good.

Depends on what kind of inflation. Low level inflation is generally a good sign associated with high employment and a growing economy. Very high inflation or deflation are both associated with more negative circumstances.

Inflation in Venezuela is running at around 25% at the moment year on year which would be kinda high and why further inflationary policy from Chavez is looked at in such a negative light. You can't get out of high inflation through printing even more money etc.

SLUSK

nesf wrote: »

Depends on what kind of inflation. Low level inflation is generally a good sign associated with high employment and a growing economy. Very high inflation or deflation are both associated with more negative circumstances.

Inflation in Venezuela is running at around 25% at the moment year on year which would be kinda high and why further inflationary policy from Chavez is looked at in such a negative light. You can't get out of high inflation through printing even more money etc.

In the old days the definition of inflation was to print money to increase the money supply. I think all inflation is bad since I think the destruction of purchasing power is a bad thing, it discourages savings which is a necessary for investments.

nesf

SLUSK wrote: »

In the old days the definition of inflation was to print money to increase the money supply. I think all inflation is bad since I think the destruction of purchasing power is a bad thing, it discourages savings which is a necessary for investments.

What has that got to do with this thread?

SLUSK

nesf wrote: »

What has that got to do with this thread?

You are criticizing Venezuela for having high inflation but other countries have the same kind of inflationary policies yet you do not seem to have a problem with that.

nesf

SLUSK wrote: »

You are criticizing Venezuela for having high inflation but other countries have the same kind of inflationary policies yet you do not seem to have a problem with that.

You think Venezuela's 25% rate is comparable to Germany's 2.7% rate and that they should be lumped into the same box of "inflationary policies"?

SLUSK

nesf wrote: »

You think Venezuela's 25% rate is comparable to Germany's 2.7% rate and that they should be lumped into the same box of "inflationary policies"?

Yes both the EU and Venezuela have inflationary policies the only differences is that Venezuela is pursuing these policies harder. 2,7% inflation per year translates into the loss of half your purchasing power in little over 26 year.

However I admit I'm not educated in economics so I fail to see how destruction in purchasing power is a good thing.

nesf

SLUSK wrote: »

However I admit I'm not educated in economics so I fail to see how destruction in purchasing power is a good thing.

If you want to pursue this in depth start a separate thread on it. It's a very complex topic due to the positive and negative effects of both inflation and deflation.

In short: you need to think about other considerations than purchasing power. Think about propensity to spend (i.e. the "why would I buy anything today if it'll be cheaper tomorrow?" problem with deflation) propensity to invest (i.e. if inflation exists this encourages people to invest in physical assets rather than monetary ones) and the increased vulnerability to recession when you have zero inflation.

ei.sdraob

SLUSK wrote: »

You are criticizing Venezuela for having high inflation but other countries have the same kind of inflationary policies yet you do not seem to have a problem with that.

firstly nesf is right, this would warrant a thread of its own

the ECB, the FED and the BOE all have a core policy of aiming for 2% inflation

needless to say 25% (and soon to be over 30% thanks to this move which effectively doubles the amount of local money) is very very high level of inflation

in fact its hyperinflation


what im trying to say over and over, is this move will make the people of Venezuela even poorer faster, while Chavez and his close buddies will reap the benefits, all hes doing is adding oil to the fire so his steak cooks faster

but some people in this thread decided to paint him into some sort of untouchable and in-corrupt revolutionary

this belief in this populist/socialist dictator (and he is a dictator as per definition and also due to his documented historical acts) by some Irish idealists is amusing and disturbing, these could be the same people who might vote in the next disaster of a politician in this country

edanto

ei.sdraob , I don't accept your point that Chavez is a dictator, but he may well be corrupt, I have no idea.

But since he has been in power, the poor people in the country have been getting a fairer deal. FACT. That's supported by the stats on this page - http://www.venezuelanalysis.com/indicators - one of which is "the poverty rate has been cut by more than half, from 54 percent of households in the first half of 2003 to 26 percent at the end of 2008."

I am very dubious of US slander of Latin American countries that do not subscribe to the Washington Consensus, as much of it seems to be motivated by a desire to disparage countries that do not 'play ball'.

Having said that I don't understand all the consequences of the devaluation and can't make a judgement about it.

What I can judge is your level of understanding of the contexts. Not knowing that they have websites in Cuba tells me that you must think people in poor countries lead pretty primitive lives.

Many of your discussion points seem regurgitated.

Tell me, have you (1) read The Shock Doctrine or (2) watched The War on Democracy
A lot of my opinions are formed from sources like that, and I'd be interested to know if you have watched/read them and they had no impact on you or you just haven't watched/read them at all?

Neither refer to Venezuela, but both give an important context and motivation to the official US policy on places like Venezuela.

Manic Moran

edanto wrote: »

But since he has been in power, the poor people in the country have been getting a fairer deal. FACT. That's supported by the stats on this page - http://www.venezuelanalysis.com/indicators - one of which is "the poverty rate has been cut by more than half, from 54 percent of households in the first half of 2003 to 26 percent at the end of 2008."

That is not necessarily a good thing.

By way of example, let's say that the reason that the poverty rates have dropped so much is because the government has greatly increased assistance payments out of its budget. Affordable, as long as the oil money keeps coming in (Particularly to 2008, I seem to recall paying a hell of a lot for petrol back then). However, when the oil money or national financial reserves fall or run out, then the poverty level will rise again: The money might have been better off being invested into training plans, infrastructure or industry: That way, sure, the poverty level isn't as dramatically improved, but there is a more stable foundation for the slower growth.

NTM

ei.sdraob

edanto wrote: »

ei.sdraob , I don't accept your point that Chavez is a dictator, but he may well be corrupt, I have no idea.

But since he has been in power, the poor people in the country have been getting a fairer deal. FACT. That's supported by the stats on this page - http://www.venezuelanalysis.com/indicators - one of which is "the poverty rate has been cut by more than half, from 54 percent of households in the first half of 2003 to 26 percent at the end of 2008."

the people in Ireland have also had it better than before under Fianna Fail's rule in last few decades, we have highest welfare rates in world etc

does that make FF in Ireland good?


Hitler was also good for the German people and brought their economy out of depression, before continuing on to starting war and genocide

edanto wrote: »

I am very dubious of US slander of Latin American countries that do not subscribe to the Washington Consensus, as much of it seems to be motivated by a desire to disparage countries that do not 'play ball'.

i couldn't give a rats arse what the US has to say, all my opinions in this thread are based on Chavez's documented actions (which are a power grab, in a classic dictator manner) as reported in major media (which i linked to thruou this thread) like BBC, Telegraph, AP and WSJ

so far im the one who providing all the evidence while i have people shouting at me for daring to criticize their beloved "revolutionary" dictator

edanto wrote: »

Tell me, have you (1) read The Shock Doctrine or (2) watched The War on Democracy
.

yes i have read Naomi's Klein work, and believe or or not I regularly do read the Guardian too (the comment is free section is interesting) like some certain other journalists shes a publicity whore doing everything to sell more books

i dont have time to entertain conspiracy theories, its documented time and time again that Chavez is acting as a classic dictator (and i provided multiple references in this thread unlike others who shout and wave hands)
this devaluation (like others before) it will only make the people he claims to help poorer while consolidating more power to him


once again to reiterate the point, in this thread i provided evidence to show that he is acting like a dictator, yet some posters keep throwing **** at me cause they dont like what they are reading, how about some of yee try to debate your points on references and fact not Socialist slogans and idealistic passages

edanto

You don't have time for 'conspiracy theories' So you're suggesting that any claim that there is a group of people acting in their own interests at the cost of another group of people is rubbish?

But that's exactly what you're saying about Chavez. So either you have time for conspiracy theories or you don't. Me, I do have time for them, but based on a fairly rigorous selection process.

So, my theory is that much of the bad press about Chavez is motivated by the fact that he is not subscribing to the Washington Consensus. I supported that with reference to a book and a documentary showing what normally happens when countries don't subscribe to the Washington Consensus.

Your theory is that Chavez is somehow (1) enriching himself and his cronies by virtue of being in power, and that he is a (2) corrupt power mad dictator. All of your 'evidence' for (2) has been shown to be a sham by other posters and you are left clutching at straws. Do you have any evidence for (1)?

ei.sdraob

edanto wrote: »

You don't have time for 'conspiracy theories' So you're suggesting that any claim that there is a group of people acting in their own interests at the cost of another group of people is rubbish?

But that's exactly what you're saying about Chavez. So either you have time for conspiracy theories or you don't. Me, I do have time for them, but based on a fairly rigorous selection process.

So, my theory is that much of the bad press about Chavez is motivated by the fact that he is not subscribing to the Washington Consensus. I supported that with reference to a book and a documentary showing what normally happens when countries don't subscribe to the Washington Consensus.

Your theory is that Chavez is somehow (1) enriching himself and his cronies by virtue of being in power, and that he is a (2) corrupt power mad dictator. All of your 'evidence' for (2) has been shown to be a sham by other posters and you are left clutching at straws. Do you have any evidence for (1)?

yes its all a conspiracy by Americans to bring him down, yes i work for CIA :rolleyes:

:cool: which posters in this thread? have "shown to be a sham" and/or have proved that he didnt:

* fire a judge because he didnt like the way the judge rules
* claimed that an independent judicial wing is a waste of time
* changed the constitution several times to give himself and indefinite term in office
* gained complete control over the country and placed his pupets in vital positions
* nationalized private enterprises and land (ie. transferring control of these to himself)
* in context of this thread, devaluation helps him keep hold on power

go on im interested in hearing what fluff you will come up with next and/or how you will try to attack me personally

im the one providing references (Guardian,BBC,AP/Google, Human Rights Watch Organization,WSJ in this post alone) and backing up my arguments, while yet go onto attack me personally and not address the points of the debate

next you gonna claim that the likes of Guardian who are well known left wing newspaper (who btw regularly feature Naomi Klein) are conspiring against Chavez in some crazy America led plot?

meditraitor

edanto wrote: »

ei.sdraob , I don't accept your point that Chavez is a dictator, but he may well be corrupt, I have no idea.

But since he has been in power, the poor people in the country have been getting a fairer deal. FACT. That's supported by the stats on this page - http://www.venezuelanalysis.com/indicators - one of which is "the poverty rate has been cut by more than half, from 54 percent of households in the first half of 2003 to 26 percent at the end of 2008."

I am very dubious of US slander of Latin American countries that do not subscribe to the Washington Consensus, as much of it seems to be motivated by a desire to disparage countries that do not 'play ball'.

Having said that I don't understand all the consequences of the devaluation and can't make a judgement about it.

What I can judge is your level of understanding of the contexts. Not knowing that they have websites in Cuba tells me that you must think people in poor countries lead pretty primitive lives.

Many of your discussion points seem regurgitated.

Tell me, have you (1) read The Shock Doctrine or (2) watched The War on Democracy
A lot of my opinions are formed from sources like that, and I'd be interested to know if you have watched/read them and they had no impact on you or you just haven't watched/read them at all?

Neither refer to Venezuela, but both give an important context and motivation to the official US policy on places like Venezuela.

Good point

southsiderosie

Regardless of whether you call him a dictator or not, Hugo Chavez clearly has authoritarian instincts, as evidenced by his comments about separation of powers and his treatment of the judiciary and the opposition media. Since he came to power, he has steadily worked to weaken those state institutions that could provide some kind of check on his personal authority as the president. Venezuela is still technically a democracy, but democracies are more than holding elections; a key component is the existence of institutions both within and outside of government that are independent of the state (i.e. an independent judiciary, a free press, etc).

That said, I think a lot of the (anti-Chavez) discussion on this thread is not taking seriously 1) how discredited American-style capitalism is in Latin America and 2) the extreme levels of economic and social inequality in the region that has traditionally driven its politics. Most Latin American countries have spent the last 100+ years lurching between left-wing populist/authoritarian governments, and right-wing military dictatorships, which were often backed by the US. Saying that leaders like Chavez represent a "small" part of the population is incorrect: leaders like Chavez, Morales, and Correa actually speak to large majorities of citizens who live in abject poverty, but see billions of dollars in wealth from their natural resources leaving the country every year.

I don't like Chavez. I think he's an autocrat at heart. I think his willingness to use public oil revenues to prop up the Castro regime is misguided, especially given Venezuela's crumbling infrastructure and skyrocketing urban crime rates. And as I've said earlier in the thread, I think his current currency scheme will be ruinous. But the historic venality, greed and corruption of the Venezuelan right means that for a lot of people, Chavez may be the lesser of two evils. Yes it seems that Venezuelans are getting tired of Chavez's meddling and micromanagement but it's not clear who the alternative to Chavez might be. That said, depending on how the currency devaluation plays out, come the 2012 elections, people may not care.

Time Magazine

Just to say: southsiderosie, your posts are a breath of fresh air. I don't always agree with you but IMHO you're already one of the most respected posters here. Welcome to the forum

Off-topic but, you know what, I don't care.

southsiderosie

Well, there was a run on the shops this weekend, and now the Venezuelan government has begun closing shops that engage in "price speculation". And today, El Pais (which is a left-wing newspaper) reported that the bolivar, Venezuela's currency, has lost almost 90% of its value since Chavez has taken office...and Venezuela imports 80% of what it consumes. Yikes.

Sorry the links are all in Spanish, but there seems to be some skepticism on the thread (some of it deserved) towards using American/British news sources for info about Venezuela (and the Spanish papers have more Latin American coverage).

Joey the lips

southsiderosie wrote: »

Well, there was a run on the shops this weekend, and now the Venezuelan government has begun closing shops that engage in "price speculation". And today, El Pais (which is a left-wing newspaper) reported that the bolivar, Venezuela's currency, has lost almost 90% of its value since Chavez has taken office...and Venezuela imports 80% of what it consumes. Yikes.

Sorry the links are all in Spanish, but there seems to be some skepticism on the thread (some of it deserved) towards using American/British news sources for info about Venezuela (and the Spanish papers have more Latin American coverage).

pointless quotation. Personally i have no problem with sources in english once they are raliable but frankly some of the sources quoted on here are the tabloid equiv of quoteing the sun when you want to talk about jordan.

I think the real question is what does it import compared to before chavez was in power. This is his goal in office ie to reduce imports.

southsiderosie

Joey the lips wrote: »

pointless quotation. Personally i have no problem with sources in english once they are raliable but frankly some of the sources quoted on here are the tabloid equiv of quoteing the sun when you want to talk about jordan.

I think the real question is what does it import compared to before chavez was in power. This is his goal in office ie to reduce imports.

El Mundo and El Pais are two major Spanish newspapers. One is center-right and one is left wing...and yet they basically say the same thing about the situation in Venezuela. If the NY Times/WSJ/Economist aren't reliable, and other large (English language) newspapers don't provide in-depth coverage of Latin America, then what sources then are we supposed to use to discuss the issue? Or am I misunderstanding your point? (I'm not really familiar with the Sun other than that it's a Murdoch rag, and I try to block out Jordan whenever possible).

Chavez stated last week his goal was to reduce imports. However, it was under his administration that the currency depreciated significantly - in a country that is highly dependent on imports. This has effectively reduced the purchasing power of the population, given their consumption patterns. These recently announced changes are an attempt to correct a problem that exists because of his own government's policies over the last decade.

As the links I provided show, within 48 hours of this change in policy, there has been panic buying and a crackdown on private vendors, and the black market price of dollars has jumped significantly. And, just as I suggested in an earlier post about show production, there has already been state intervention in how private vendors price their goods. I hope I am wrong, but I think this is going to get ugly.

Joey the lips

southsiderosie wrote: »

El Mundo and El Pais are two major Spanish newspapers. One is center-right and one is left wing...and yet they basically say the same thing about the situation in Venezuela. If the NY Times/WSJ/Economist aren't reliable, and other large (English language) newspapers don't provide in-depth coverage of Latin America, then what sources then are we supposed to use to discuss the issue? Or am I misunderstanding your point? (I'm not really familiar with the Sun other than that it's a Murdoch rag, and I try to block out Jordan whenever possible).

Chavez stated last week his goal was to reduce imports. However, it was under his administration that the currency depreciated significantly - in a country that is highly dependent on imports. This has effectively reduced the purchasing power of the population, given their consumption patterns. These recently announced changes are an attempt to correct a problem that exists because of his own government's policies over the last decade.

As the links I provided show, within 48 hours of this change in policy, there has been panic buying and a crackdown on private vendors, and the black market price of dollars has jumped significantly. And, just as I suggested in an earlier post about show production, there has already been state intervention in how private vendors price their goods. I hope I am wrong, but I think this is going to get ugly.

I cannot argue with that i suppose. So really the test will be if he manages to stableise the economy with these tactics or will it become messy.