CARACAS - Venezuelans puzzled over the impact of a complicated currency devaluation and fretted that dire product shortages in the OPEC nation's recession-hit economy would not go away.
President Nicolas Maduro's socialist government this week launched a 70 percent devaluation via a new "free-floating'' currency system known as Simadi, the third of three-tier exchange controls created by his predecessor, Hugo Chavez.
"They're doing this because they don't have any money,'' said a man who gave his name only as Felix.
"This is not going to solve the problem,'' said Felix, 83, as he stood in a senior citizens line with about 50 other people to buy rice and coffee at a Caracas supermarket. "We're going to keep waiting in line to buy anything we need.''
The Simadi system on Friday posted an exchange rate of 174 bolivars per dollar, but state officials insist most of the country's foreign exchange will be sold at two preferential rates: 6.3 for essential goods such as food staples, and 12 for other sectors.
The country's central bank administers dollars at those two rates, but importers complain that allocations are limited, are often delayed and require overwhelming paperwork.
Dollars on the black market fetch 190 bolivars.
The two preferential rates of 6.3 and 12 can help keep prices down for food and medicine, but businesses consistently struggle to obtain dollars at the official rate, which means they cannot bring in raw materials or machine parts. As a result, there are shortages of basic consumption goods ranging from chicken to laundry detergent, leading to occasional scuffles for scarce products.
Approval rating sinks
The scarcities and lines have contributed to a dip in Maduro's approval rating — to 22 percent, according to one pollster — and give opponents hope of wresting control of parliament from the ruling Socialist Party in a vote later this year.
Maduro says the country is a victim of an "economic war,'' and argues that Venezuelans today are generally better off and better fed than they were before Chavez took office in 1999.
The devaluation is likely to ripple across the balance sheets of foreign corporations with significant exposure to Venezuela, ranging from household products maker Kimberly-Clark to oil services company Schlumberger NV.
Venezuelan bonds were up Friday after the release of the exchange rate, as devaluations tend to reduce the cost of imports and free up more hard currency to pay debt.
The benchmark Global 2027 was up 0.603 point to a price of 41.570 and a yield of 24.261 percent.
Economists believe the benefits of devaluing are muted because the new Simadi system will receive only a small fraction of the dollars that the government sells, with the vast majority being sold at preferential rates.
Essentially, those who cannot obtain dollars at the other two rates will try to get the Simadi rate.
"We remain skeptical about the impact this three-tiered FX system will have on an already stagflationary economy,'' wrote UBS economists in a research note. "We believe that Simadi will, at most, remain a rather marginal FX allocation system.''
Venezuela's bonds are trading at distressed levels on concerns that the rout in oil prices could prompt a default; on average, they pay 26 percentage points more than comparable U.S. Treasury bills. Maduro dismisses default talk as ill-intentioned rumor-mongering.
Few products available
Unlike previous devaluations, when Venezuelans crowded electronics shops to pick up appliances before prices rose, lines were scant Friday because low inventories have left shelves largely bare.
"The last televisions we sold arrived in November and were gone the same day,'' said a salesman at one popular electronics shop who asked not to be named. "If they come at the black market rate, I think people would buy them no matter the price.''
Other Venezuelans worried that inflation, already the worst in the Americas at an officially estimated 64 percent last year, would spike even further.
"Everything's going to carry on being tough,'' said a 38-year-old woman, who gave her name only as Josefina, in a Caracas shopping line of about 100 people.
Opposition leaders complained that Maduro had disguised the devaluation, which came via an Excel sheet on the central bank's website, and sought to distract Venezuelans by simultaneously denouncing a coup plot in the air force.