|The Revolution Devalued? What the Venezuelan Currency Change Signifies|
|Written by Clifton Ross|
|Wednesday, 13 February 2013 22:01|
After months of rumors in opposition circles of a forthcoming devaluation, and denials of the rumor by Bolivarian government officials, the Venezuelan bolívar was finally devalued by 47% on February 8th. Even though devaluation has become a fairly regular event, especially since currency controls were put in place in 2003, this devaluation has a potentially far greater significance for the future of the Bolivarian Revolution than the previous economic measures and an undeniably greater immediate impact on the base of support for the Bolivarian government.
The reasons for the devaluation are many and complex. Some analysts argue that that the devaluation is aimed at controlling inflation (Venezuela’s, at 20% last year, is the highest in Latin America) while others, like economist Pedro Palma, argue that it will increase inflation. The devaluation will certainly help the government’s balance sheet and effectively reduce its deficit and it will also bring the official exchange rate a bit closer to that of the “parallel” or black market rate. The devaluation will also likely address the problem of scarcity and shortages of basic goods.
Vice-President Nicolas Maduro explained the devaluation by saying that the root of the problem is speculation and a conspiracy of foreign, and internal enemies, to destroy the process of change in the country by creating scarcity through hoarding or withholding essential goods. Such activity in the business sector aims at raising prices and increasing profits at the same time the government attempts to maintain low “solidarity” prices to keep essential commodities affordable to the poor and working people.
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