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There will be no further devaluation in Venezuela according to the government

There will be no further devaluation in Venezuela according to the government

Posted by Dubraswka Aguilar on November 10, 2014

No devaluation here.

The drop in oil prices fuelled hopes in some pockets that the possibility of adjustment measures was back on Venezuela's decision table, as the country is heavily dependent on crude exports.

But on Sunday finance minister Rodolfo Marco Torres dashed those hopes away, writes the FT's Andes Correspondent, Andres Schipani.

"There's no devaluation planned," he said in an interview with a local television station.

To recap, Venezuela currently provides 80 per cent of hard currency at an overvalued exchange rate of 6.3 bolívares to the dollar for essential imports. The remaining 20 per cent are disbursed through two separate auction processes, Sicad 1, which trades at some 11 bolívars to the greenback, and Sicad 2, which hovers around 50.

Meanwhile, the black market rate trades at some whopping 104 bolívares per dollar. Ecoanalítica, a respected local consultancy tweeted after Mr Torres' comments:

Regarding what the finance minister said, keeping the foreign exchange rate at 6.3 during 2015 will be impossible.

Regarding what the finance minister said, only one foreign exchange rate is required at 27 bolívares per dollar.

Economists think an outright devaluation would be a good idea for an economy some believe to be in recession, with a hard currency crunch that has fuelled shortages of everyday goods, which in turn has sent chills down investors' spines over the country's ability to pay its debts.

 

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