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 Firms Concerned About China's New Cyber Regulations

New rules would require technology companies doing business in financial sector to hand over their source code, adopt Chinese encryption algorithms More

WHO Focus on Ebola Shifts to Ending Outbreak

Focus to be less on building facilities and more on efforts to find infected people, manage their cases, engage with communities and ensure proper burials More

US Scientist Who Conceived of Groundbreaking Laser Technology Dies

Charles Townes, Nobel laureate, laser co-creator paved way for other scientific discoveries: CDs, eye surgery, metal cutters to name a few technologies that rely on lasers More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Super Bowl Ads Compete for Eyes on TV, Webi
X
January 29, 2015 9:58 AM
Super Bowl Sunday (Feb. 1) is about more than just the NFL's American football championship and big parties to watch the game. Viewers also tune in for the world famous commercials that send Facebook and Twitter abuzz. Daniela Schrier reports on the social media rewards for America’s priciest advertising.
Video

Video Super Bowl Ads Compete for Eyes on TV, Web

Super Bowl Sunday (Feb. 1) is about more than just the NFL's American football championship and big parties to watch the game. Viewers also tune in for the world famous commercials that send Facebook and Twitter abuzz. Daniela Schrier reports on the social media rewards for America’s priciest advertising.
Video

Video Theologians Cast Doubt on Morality of Drone Strikes

In 2006, stirred by photos of U.S. soldiers mistreating Iraqi prisoners, a group of American faith leaders and academics launched the National Religious Campaign Against Torture. It played an important role in getting Congress to investigate, and the president to ban, torture. VOA's Jerome Socolovsky reports.
Video

Video Freedom on Decline Worldwide, Report Says

The state of global freedom declined for the ninth consecutive year in 2014, according to global watchdog Freedom House's annual report released Wednesday. VOA's William Gallo has more.
Video

Video As Ground Shifts, Obama Reviews Middle East Strategy

The death of Saudi Arabia’s king, the collapse of a U.S.-friendly government in Yemen and a problematic relationship with Israel’s leadership are presenting a new set of complications for the Obama administration and its Middle East policy. Not only is the U.S. leader dealing with adversaries in Iran, the Islamic State and al-Qaida, but he is now juggling trouble with traditional allies, as White House correspondent Luis Ramirez reports.
Video

Video MRI Seems to Help Diagnose Prostate Cancer, Preliminary Study Shows

Just as with mammography used to detect breast cancer, there's a lot of controversy about tests used to diagnose prostate cancer. Fortunately, a new study shows doctors may now have a more reliable way to diagnose prostate cancer for high risk patients. More from VOA's Carol Pearson.
Video

Video Smartphones About to Make Leap, Carry Basic Senses

Long distance communication contains mostly sounds and pictures. For now. But scientists in Britain say they are close to creating additions for our smartphones that will make it possible to send taste, smell and even a basic touch. VOA’s George Putic reports.
Video

Video NASA Monitors Earth’s Vital Signs From Space

The U.S. space agency, NASA, is wrapping up its busiest 12-month period in more than a decade, with three missions launched in 2014 and two this month, one in early January and the fifth scheduled for January 29. As VOA’s Rosanne Skirble reports, the instruments being lifted into orbit are focused on Earth’s vital life support systems and how they are responding to a warmer planet.
Video

Video Saved By a Mistake - an Auschwitz Survivor's Story

Dagmar Lieblova was 14 when she arrived at Auschwitz in December 1943, along with her entire Czech Jewish family. All of them were to die there, but she was able to leave after several months due to a bureaucratic mix-up which saved her life. Now 85, with three children and six grandchildren, she says she has a feeling of victory. This report by Ahmad Wadiei and Farin Assemi, of RFE/RL's Radio Farda is narrated by RFE’s Raymond Furlong.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid

More Americas News

HRW: Security Measures Erode Human Rights Worldwide

New Human Rights Watch report cites Nigeria, Iraq, Syria, Israel and the United States among nations using security concerns to justify rights violations
More

Chilean MPs Approve Measure Allowing Civil Unions

Bill will give many legal rights afforded to married couples to about two million more Chileans - mostly unmarried heterosexuals but also gay couples
More

Don't Meddle in Our Politics, Cuba's Leader Warns US

Fomenting opposition to Cuba's government will undermine efforts at normalizing bilateral relations, he says at summit in Costa Rica
More

Owner of Gun That Killed Argentine Prosecutor Emerges From Hiding

Diego Lagomarsino says he lent firearm for protection to Alberto Nisman, who was probing 1994 bombing of Buenos Aires Jewish community center
More

Rights Group: MPs in Dozens of Countries Face Abuse

Inter-Parliamentary Union rights committee reports more than 300 lawmakers in 40 countries subject to dangers, including death
More

Mexico Confirms Missing Students Murdered by Drug Gang

Until now, the government had said only that the students were almost certainly murdered after clashing that night with corrupt police officers
More