Tonight Chavez in a single address through VTV announced the long awaited devaluation. I friend called me to tell me the news, I kept watching my movie unperturbed...
See, Chavez who calls for cadenas on the stupidest of motives this time was ashamed enough to announce devaluation sans cadena. In his propaganda goals Chavez has no problem to force simultaneous transmission on ALL TV and radio outlets, for as long as he pleases, for as often as he pleases. That is the cadena. But to announce that we were losing half of our savings, half of our incomes, half of our property, he does that cowardly, at the end of the long Venezuelan holiday of late December early January, on a Friday night, only on the state networks.
I think this is the real news tonight, a reminder of what a coward Chavez is.The devaluation? We were wondering how come it had not happened yet.
As for the devaluation itself, it will affect us of course, pushing the inflation of 2010 to the 50% levels. But we are already at 30% and a lot of the goods that would "benefit" from the dual exchange rate were already purchased at the parallel market rate, comparable to the new one when you factor in corruption.
I did predict a devaluation to at least 3 Bs per USD for the first semester and I am proven right, though earlier than expected (I was thinking February). What I did not preview was the dual exchange rate because the government had fought for so long from returning to the RECADI years of Herrera and Lusinchi where we had several type of exchange rates. That fostered a corruption that chavismo did not want to be associated with. But now that the corrupt bank scandals are on us with all of those overnight fortunes made on currency exchange shenanigans, why not go to a dual exchange?
This one is set wonderfully: what the government buys will be at 2.60 for a USD. What the rest of the people buy will be at 4.3 Bsf, and what the government sells overseas will be at 4.3 Bsf. A sweet deal if ever: the government keeps subsidizing largely what it buys to win elections and get TWICE the amount of Bolivares for what it sells, yet more extra income for Chavez at electoral time. The average? A little bit above 3, as I predicted (pat, pat, pat...)
But there is a reason why Chavez is ashamed enough to go off cadena mode, even though he put the new rate at 4.3 (the low one, the 2.6, is just a fake for Chavez direct electoral needs).
In 1983 the currency was at 4.3, the date of our first major devaluation. When Chavez took office it was reaching 500, about 100 fold devaluation in 15 years. Today it is at 4300 (we chopped three zeroes a year ago), another 10 fold devaluation in 11 years. There you have it, the extent of Chavez failure, even though he got a fortune in oil between 2003 and 2008, a fortune the other guys did not get.
You cannot put any spin on that. Nor on Chavez cowardice.