Venezuela: ‘optimise’ every dollar

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Venezuela keeps fidgeting with its tight foreign exchange controls. Earlier this week President Nicolás Maduro announced the government was restructuring the way it allocates greenbacks in its import-dependent economy.

He said the government was establishing the “National Centre of Exterior Commerce”, an umbrella organisation to oversee the main foreign exchange agency, Cadivi, as well as the country’s forex auction mechanisms.

Maduro said on Wednesday afternoon he was creating “new institutions, mechanisms, renewed policies.” For him, Venezuela has the dollars necessary for the function of the economy, so what they need to do now, “is to optimise each dollar.”

Speeches aside, some believe another devaluation could be the way to go, although the government has been adamant that is not a choice. Of course, that might be an unpopular move ahead of the municipal elections in early December.

The country had already devalued the bolivar by 32 per cent in February to 6.3 per dollar. Last week, the government announced the launch of an exchange rate for tourists, which is yet to be determined.

Still, it has been unable to stop the sharp drop of the local currency in the black market, where one dollar can fetch a stash of some 55 bolivars. And on Thursday, in the latest blow to his plan to rein in the economy, the annualised inflation rate hit 54.3 per cent while the country’s “scarcity index”, which measures the shortages of basic goods, climbed to 22.4 per cent – the highest level in almost three years.

But Maduro has been blaming his country’s economic woes on sabotage sparked and fuelled by right-wing opponents, backed by the US.

So the recent announcement was his “offensive to defeat an economic war”, during which he also unveiled a “great civic-military operation” that will inspect businesses as a way of battling hoarding and speculation.

In a BancTrust note on Thursday Hernán Yellati and Rosaura Vargas suggested Maduro was really battling opponents closer to home:

President Maduro is trying to balance internal trends within his party while addressing undermined macroeconomic conditions, in our view. We reiterate that draconian speeches do not necessarily go in hand with radical economic measures, especially now with upcoming elections and high-command figures trying to provide confidence that non-friendly market measures will be implemented in the short term.

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