The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Foreign Exchange

Venezuela: ‘Crazed genius’ of Chávez’s dual-currency move

Selective devaluation only of short-term efficacy; Power supply crisis looms

Expropriation threat: employees of the Exito hypermarket in Caracas and supporters of Hugo Chávez express support for the president’s decision to take over the chain

Expropriation threat: employees of the Exito hypermarket in Caracas and supporters of Hugo Chávez express support for the president’s decision to take over the chain

Despite short-term gains for the government, the long-term outlook for the Venezuelan economy following a currency devaluation last month looks bleak. "The devaluation provides a short-term fiscal windfall but it does not solve the underlying economic model’s propensity to throw up distortions," says Stuart Culverhouse, head of research at investment banking boutique Exotix. "If serious changes aren’t made to the fiscal spending regime and monetary policy isn’t tightened then a devaluation will be necessary again in a few years to keep the country going." This was the third devaluation since 2003, when Venezuela’s president, Hugo Chávez, introduced controls to prevent capital flight.

Last month Chávez announced a move to establish a dual currency and effectively devalue the bolivar. This announcement was followed with threats that any business that tried to increase prices in response would be at the mercy of government troops.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree