Venezuela: No Surprise, No Relief

Consensus Forecasts

Over the past nine years, Venezuela has undergone five major devaluations and this month it has happened again. On Friday February 8, the Venezuelan government announced a devaluation of the bolivar fuerte of more than 30% against the US dollar, from 4.2947 to 6.2921, with the aim of shoring up growth and a dwindling fiscal balance. Author Daniel Volberg of Morgan Stanley critically analyses the move, arguing that while the devaluation was long overdue, it will fall far short of correcting the country’s severe macroeconomic imbalances. He highlights three key macro and political economy factors impinging on the devaluation: firstly, even after the devaluation, he believes the exchange rate to be overvalued; secondly, devaluation is unlikely to correct serious distortions (including widespread shortages of basic goods); and thirdly, the move indicates that regime and policy change in the near future seem unlikely.

You can download a sample of Current Economics at www.consensuseconomics.com.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s