Venezuela’s government is hinting toward unifying its foreign exchange rates. There are three official exchange rates in Venezuela today, but the system has yet help the country cope with ongoing shortages of basic products. CCTV’s Martin Markovits reports from Caracas.
Conrado Cifuentes’ lighting company has been around for 30 years, and even though he’s managed to maintain regular production amid high inflation, the lack of import dollars – along with a dysfunctional multiple exchange rate system could drive him out of business.
During a televised interview last week, Venezuela’s Economic Vice President Rafael Ramirez announced a potential reform to the exchange rates.
While the move is yet to be implemented, the shift from late President Hugo Chavez’ eleven-year-old currency controls have become controversial. Designed to prevent capital flight and keep prices down for the poor, most economists say they have backfired. Recently, it has become harder to access dollars to import products, leading to widespread shortages of basic goods and to the highest inflation rate in the Americas. The government’s recent introduction of two additional exchange rates designed to address this problem proved to be complicated and cumbersome.
Some analysts argue that currency exchange reform alone would result in more inflation, severely affecting the pockets of ordinary Venezuelans. Which ultimately could affect Maduro’s key political base, the poor.
It is speculated that this new exchange rate will be at 25 bolivars per U.S. dollar. A figure that is much lower than current market rate that fetches at 80. Making some wonder whether creating a single-exchange system will have any effect at all.