News / Americas

    Economists Divided Over Venezuela's New Forex System

    Economists Divided Over Venezuela's New Forex Systemi
    X
    March 28, 2014 10:45 PM
    In the midst of ongoing anti-government protests, the Venezuelan government has introduced a new currency exchange system to reduce the soaring black market for dollars, which has contributed to food shortages and high inflation in the country. VOA’s Brian Padden reports that both liberal and conservative economists support this move, but are divided over whether the measure is strong enough to stabilize the economy of this oil-rich but troubled country.
    Brian Padden
    In the midst of ongoing anti-government protests, the Venezuelan government has introduced a new currency exchange system to reduce the soaring black market for dollars, which has contributed to food shortages and high inflation in the country. 

    Both liberal and conservative economists support this move, but are divided over whether the measure is strong enough to stabilize the economy of this oil-rich but troubled country.

    Venezuela’s leaders have taken harsh measures against anti-government protests that began in February and have on occasion turned violent and deadly.  But the government has also taken a conciliatory step to address a key a demand of the protesters -  fix the ailing economy.
     
    It has implemented a new market-based currency exchange system called “Sicad 2” to sell dollars for eight to 10 times the official government-controlled exchange rate of 6.3 bolivars per dollar.

    While Venezuela is a rich country and claims to have the world's largest oil reserves, the economy has suffered from hyperinflation and shortages of basic goods, due in part to the restricted government exchange rate.  

    Mark Weisbrot, with the Center for Economic and Policy Research, said in an interview from Peru that the new exchange system should help stabilize the economy by reducing the impact of  the illegal black market for dollars.   

    “You had kind of a bubble in the black market for the dollar, people buying dollars because they thought it was a one-way bet and it was always going to, the dollar value would always go up, and now that is not going to be the case," he said.

    Venezuelan opposition groups call this new system a currency devaluation, but the government says the new rate is only for nonessential goods.  

    Owners of a gift shop in Caracas called Viqui, that imports products from China, told VOA they have submitted a Sicad 2 request to the Central Bank to purchase dollars.  But the bureacratic process could take weeks, and there is concern that the government will not provide enough dollars to make the new system work.  

    Barbara Kotschwar, with the Peterson Institute for International Economics, says the lack of dollars does not address Venezuela’s main economic problem.  The country, including the oil industry, is producing less, and the government is printing more money to cover its growing debts.

     “The money supply has doubled since about December 2012. This is in an economy that has been growing at under two percent," said Kotschwar.

    When Sicad 2 first debuted, the black market rate fell from about 90 to close to 50 bolivars to the dollar, but, since then, the rate has been rising - indicating to many that confidence in Venezuela’s economy remains low.

    You May Like

    US Leaders Who Served in Vietnam War Look Back and Ahead

    In New York Times opinion piece, Secretary of State John Kerry, Senator John McCain and former Senator Bob Kerrey say as US strengthens relations with Vietnam, it is important to remember lessons learned from war

    Who Are US Allies in Fight Against Islamic State?

    There is little but opportunism keeping coalition together analysts warn — SDFs Arab militias are not united even among themselves, frequently squabble and don’t share Kurds' vision for post-Assad Syria

    Learning Foreign Language Helps US Soldiers Bridge Culture Gap

    Effective interaction with local populations part of everyday curriculum at Monterey, California, Defense Language Institute

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Vietnamese-American Youth Optimistic About Obama's Visit to Vietnami
    X
    Elizabeth Lee
    May 22, 2016 6:04 AM
    U.S. President Barack Obama's visit to Vietnam later this month comes at a time when Vietnam is seeking stronger ties with the United States. Many Vietnamese Americans, especially the younger generation, are optimistic Obama’s trip will help further reconciliation between the two former foes. Elizabeth Lee has more from the community called "Little Saigon" located south of Los Angeles.
    Video

    Video Vietnamese-American Youth Optimistic About Obama's Visit to Vietnam

    U.S. President Barack Obama's visit to Vietnam later this month comes at a time when Vietnam is seeking stronger ties with the United States. Many Vietnamese Americans, especially the younger generation, are optimistic Obama’s trip will help further reconciliation between the two former foes. Elizabeth Lee has more from the community called "Little Saigon" located south of Los Angeles.
    Video

    Video First-generation, Afghan-American Student Sets Sights on Basketball Glory

    Their parents are immigrants to the United States. They are kids who live between two worlds -- their parents' homeland and the U.S. For many of them, they feel most "American" at school. It can be tricky balancing both worlds. In this report, produced by Beth Mendelson, Arash Arabasadi tells us about one Afghan-American student who seems to be coping -- one shot at a time.
    Video

    Video Newest US Citizens, Writing the Next Great Chapter

    While universities across the United States honor their newest graduates this Friday, many immigrants in downtown Manhattan are celebrating, too. One hundred of them, representing 31 countries across four continents, graduated as U.S. citizens, joining the ranks of 680,000 others every year in New York and cities around the country.
    Video

    Video Vietnam Sees Strong Economic Growth Despite Incomplete Reforms

    Vietnam has transformed its communist economy to become one of the world's fastest-growing nations. While the reforms are incomplete, multinational corporations see a profitable future in Vietnam and have made major investments -- as VOA's Jim Randle reports.
    Video

    Video Qatar Denies World Cup Corruption

    The head of Qatar’s organizing committee for the 2022 World Cup insists his country's bid to host the soccer tournament was completely clean, despite the corruption scandals that have rocked the sport’s governing body, FIFA. Hassan Al-Thawadi also said new laws would offer protection to migrants working on World Cup construction projects. VOA's Henry Ridgwell reports.
    Video

    Video Infrastructure Funding Puts Cambodia on Front Line of International Politics

    When leaders of the world’s seven most developed economies meet in Japan next week, demands for infrastructure investment world wide will be high on the agenda. Japanese Prime Minister Shinzo Abe’s push for “quality infrastructure investment” throughout Asia has been widely viewed as a counter to the rise of Chinese investment flooding into region.
    Video

    Video Democrats Fear Party Unity a Casualty in Clinton-Sanders Battle

    Democratic presidential front-runner Hillary Clinton claimed a narrow victory in Tuesday's Kentucky primary even as rival Bernie Sanders won in Oregon. Tensions between the two campaigns are rising, prompting fears that the party will have a difficult time unifying to face the presumptive Republican nominee, Donald Trump. VOA national correspondent Jim Malone has more from Washington.
    Video

    Video Portrait of a Transgender Marriage: Husband and Wife Navigate New Roles

    As controversy continues in North Carolina over the use of public bathrooms by transgender individuals, personal struggles with gender identity that were once secret are now coming to light. VOA’s Tina Trinh explored the ramifications for one couple as part of trans.formation, a series of stories on transgender issues.
    Video

    Video Amerikan Hero Flips Stereotype of Middle Eastern Character

    An Iranian American comedian is hoping to connect with American audiences through a film that inverts some of Hollywood's stereotypes about Middle Eastern characters. Sama Dizayee reports.
    Video

    Video Budding Young Inventors Tackle City's Problems with 3-D Printing

    Every city has problems, and local officials and politicians are often frustrated by their inability to solve them. But surprising solutions can come from unexpected places. Students in Baltimore. Maryland, took up the challenge to solve problems they identified in their city, and came up with projects and products to make a difference. VOA's June Soh has more on a digital fabrication competition primarily focused on 3-D design and printing. Carol Pearson narrates.

    Special Report

    Adrift The Invisible African Diaspora

    More Americas News

    Colombia Says 2 More Journalists Missing in Rough Area

    Journalists missing in region where security forces are already carrying out massive search for prominent Spanish journalist, President Juan Manuel Santos said Tuesday

    Cuba to Legalize Small, Medium-sized Private Businesses

    Move could significantly expand space allowed for private enterprise in one of world's last communist countries

    Coca Cola to Halt Some Production in Venezuela

    Sugar shortages and a deep recession have been forcing production shutdowns across the country

    Recording Allegedly Shows Minister Plotting Against Brazil's Rousseff

    Planning Minister Romero Jucá, who will step down temporarily, denies allegation, says words in published transcript of tape were taken out of context

    Mercury Poisoning Prompts Peru to Declare State of Emergency in Amazon

    People, rivers and fish poisoned; government blames illegal gold mining

    Peru's Fujimori Faces Money-laundering Investigation

    Probe opened in March, but became widely known Friday after report in Lima newspaper; investigation is focused on alleged suspicious financial transactions and campaign contributions