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thepeel
Joined: 08 Aug 2004
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 Posted: Tue Sep 04, 2007 6:54 pm Post subject: Venezuela's currency plummets |
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The revolution continues:
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CARACAS: The Venezuelan economy, under the direction of President Hugo Ch�vez, is starting to unravel in the currency market.
While Venezuela earns record proceeds from oil exports, consumers face shortages of meat, flour and cooking oil. Annual inflation has risen to 16 percent, the highest in Latin America, as Ch�vez tripled government spending in four years.
Exxon Mobil and ConocoPhillips are pulling out after Ch�vez demanded that they cede control of joint venture projects.
The bolivar has tumbled 30 percent this year to 4,850 per dollar on the black market, the only place it trades freely because of government controls on foreign exchange. That compares with the official rate of 2,150 per dollar set in 2005. Ch�vez may have to devalue the bolivar to reduce the gap and increase oil proceeds, which make up half the government's revenue.
"This has been the worst-managed oil boom in Venezuela's history," said Ricardo Hausmann, a former government planning minister who now teaches economics at Harvard University. "A devaluation is a foregone conclusion. The only question is when."
JPMorgan Chase and Merrill Lynch expect Ch�vez to devalue the bolivar 14 percent in the first quarter of 2008 after he introduces a new currency Jan. 1 that will lop three zeros off all denominations.
The new currency, to be called the strong bolivar, will have an exchange rate of 2.15 per dollar, the equivalent of the current rate, Finance Minister Rodrigo Cabezas said last week. Analysts forecast that the official rate will decline 13 percent by the end of 2008, according to a Bloomberg survey.
"We're not going to devalue, no matter how much they pressure us," Cabezas said last week. "The so-called parallel market doesn't dictate our fiscal, exchange or monetary policies."
Ch�vez, an ally of President Fidel Castro of Cuba, weakened the currency 11 percent in 2005. Ch�vez imposed restrictions on foreign exchange in 2003 to halt the capital flight that has driven down the bolivar more than 70 percent since he took office in 1999.
A devaluation would give the government more bolivars from its oil export tax receipts, helping fund Ch�vez's policies to provide free health care, housing and discounted food to millions of Venezuelans. The government says social programs helped cut the poverty rate to 34 percent in the first half of 2006 from 49 percent eight years earlier.
Oil, which has risen 155 percent in the past five years, accounts for about 90 percent of Venezuela's exports.
As the gap between the official exchange rate and the black market rate has increased, so has the incentive to exploit rules, like a regulation that allows people to spend $5,000 a year on their credit cards while traveling abroad.
Some Venezuelans travel to nearby Cura�ao, where they buy $5,000 of casino poker chips with their credit cards, exchange the chips for cash and then sell the dollars on the black market back in Caracas.
"People are invoking their right to circumvent what are very, very stiff controls," said Alberto Ramos, senior Latin America economist at Goldman Sachs Group in New York.
The foreign exchange regulations are part of the controls that Ch�vez has created in his "march to socialism." The government sets retail prices on hundreds of consumer products and fixes both the maximum rate at which banks can lend and the minimum interest they can pay depositors.
Ch�vez, who is seeking to end presidential term limits, has taken $17 billion of foreign reserves from the central bank and expropriated dozens of farms that he deemed underutilized.
He nationalized Venezuela's biggest private electric and telephone utilities and took majority stakes in oil projects owned by Exxon and ConocoPhillips. Foreign direct investment was a negative $881 million in the first half as foreign companies pulled out money.
Ch�vez terminated the broadcast license of the country's most-watched television network in May, sparking weeks of student protests. He has threatened to take over cement makers, hospitals, banks, supermarkets and butcher shops, saying they were not obeying price controls.
"It's like our director of marketing, our director of sales, our director of manufacturing is President Ch�vez," said Edgar Contreras, who runs international operations at Molinos Nacionales, a Caracas-based food manufacturer that employs 1,500 people. "We can't go on like this."
Contreras called the government-set prices on many products "fantasy prices" that are below production costs. Milk, chicken, coffee and flour have disappeared from store shelves in Caracas at times this year. |
http://www.iht.com/articles/2007/09/02/bloomberg/bxbux.php
I'm sure the poor will benefit from all this. |
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jinju
Joined: 22 Jan 2006
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| Posted: Tue Sep 04, 2007 7:08 pm Post subject: |
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| Venezuela, the new Zimbabwe? |
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Mosley
Joined: 15 Jan 2003
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| Posted: Tue Sep 04, 2007 7:28 pm Post subject: |
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As Gomer Pyle used to say," Surprise! Surprise! Surprise!"
I called Venezuela "The S. American Zimbabwe"(albeit one w/oil) months ago....
Last edited by Mosley on Tue Sep 04, 2007 7:55 pm; edited 1 time in total |
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thepeel
Joined: 08 Aug 2004
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| Posted: Tue Sep 04, 2007 7:35 pm Post subject: |
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If you want to run your country into the ground, these kind of currency policies are among the fastest ways to do it.
I sincerely hope the Americans fully keep their distance. I do not want the Left to be able to blame this looming failure on the USA. Unreconstructed socialists need to see the fruits of their ideas. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Tue Sep 04, 2007 7:40 pm Post subject: |
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| BJWD wrote: |
| I do not want the Left to be able to blame this looming failure on the USA. Unreconstructed socialists need to see the fruits of their ideas. |
The resentful Left will always find ways to blame problems in foreign lands on Uncle Sam. The progressive Left saw this coming. |
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jinju
Joined: 22 Jan 2006
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| Posted: Tue Sep 04, 2007 7:51 pm Post subject: |
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| BJWD wrote: |
If you want to run your country into the ground, these kind of currency policies are among the fastest ways to do it.
I sincerely hope the Americans fully keep their distance. I do not want the Left to be able to blame this looming failure on the USA. Unreconstructed socialists need to see the fruits of their ideas. |
America should do absoluteoy nothing to help out Venezuela, even when their economy totally collapses. let them starve, they deserve it. |
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jinju
Joined: 22 Jan 2006
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| Posted: Tue Sep 04, 2007 7:52 pm Post subject: |
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| Kuros wrote: |
| BJWD wrote: |
| I do not want the Left to be able to blame this looming failure on the USA. Unreconstructed socialists need to see the fruits of their ideas. |
The resentful Left will always find ways to blame problems in foreign lands on Uncle Sam. The progressive Left saw this coming. |
You just coined a new oxymoron. You know, the pro North Korean lefty idiots in Korea call themselves progressives too. Theres no such thing as a progressive left though. |
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thepeel
Joined: 08 Aug 2004
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| Posted: Tue Sep 04, 2007 7:58 pm Post subject: |
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| jinju wrote: |
| Kuros wrote: |
| BJWD wrote: |
| I do not want the Left to be able to blame this looming failure on the USA. Unreconstructed socialists need to see the fruits of their ideas. |
The resentful Left will always find ways to blame problems in foreign lands on Uncle Sam. The progressive Left saw this coming. |
You just coined a new oxymoron. You know, the pro North Korean lefty idiots in Korea call themselves progressives too. Theres no such thing as a progressive left though. |
It is hard to define what is left and right and not. But Kuros is right, a very cynical and bitter section of what would self-describe as "left" will find any way possible to blame the problems of everybody on the USA. They will take whatever connection the situation has to the USA, no matter how flimsy, and exaggerate it into a full-blown anti-American narrative that the legions of idiot minions in academia, journalism and "activists" will believe without a moments thought.
For example, look how quickly the coup against Chavez went from the US knew to US supported to US backed to US funded to US engineered. Same with the Chile coup back in the day. |
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matthews_world
Joined: 15 Feb 2003
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| Posted: Tue Sep 04, 2007 8:09 pm Post subject: |
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How about a 'strong won'?? .95 =$1
Would that fly? |
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Joo Rip Gwa Rhhee
Joined: 25 May 2003
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| Posted: Wed Sep 05, 2007 6:53 am Post subject: |
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Mosley Wrote:
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As Gomer Pyle used to say," Surprise! Surprise! Surprise!"
I called Venezuela "The S. American Zimbabwe"(albeit one w/oil) months ago.... |
Yep.
=
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Last edited by Joo Rip Gwa Rhhee on Wed Sep 05, 2007 7:04 am; edited 1 time in total |
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Leavingkorea
Joined: 27 Apr 2007
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| Posted: Wed Sep 05, 2007 6:56 am Post subject: |
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| But it's 2 cents a liter for gas!!!!! |
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Joo Rip Gwa Rhhee
Joined: 25 May 2003
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| Posted: Wed Sep 05, 2007 7:08 am Post subject: Re: Venezuela's currency plummets |
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[quote="BJWD"]
Time for the US to put in place a full scale trade embargo against Venezuala.
The US has to start by doing the correct thing and not buy any oil from that nation.
Next step any company anywhere in the world that does business with Venezula can not do business with the US. |
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On the other hand
Joined: 19 Apr 2003
Location: I walk along the avenue
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| Posted: Wed Sep 05, 2007 7:32 am Post subject: |
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BJWD wrote:
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| I sincerely hope the Americans fully keep their distance. I do not want the Left to be able to blame this looming failure on the USA. Unreconstructed socialists need to see the fruits of their ideas. |
Joo wrote:
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Time for the US to put in place a full scale trade embargo against Venezuala.
The US has to start by doing the correct thing and not buy any oil from that nation.
Next step any company anywhere in the world that does business with Venezula can not do business with the US. |
Nice to see that BJWD's reality-based counsel has gone unheeded by the more "activist" members of the board's right wing.
Joo:
Why are you so fired up about the USA taking an aggressive stance against Chavez? Love him or hate him, I don't see how he's gonna have much influence outside of his own little sphere of influence. If his policies are really so bad, Venezuela will just collapse on its own accord, leaving his left-wing fan club around the world with egg on their faces. |
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On the other hand
Joined: 19 Apr 2003
Location: I walk along the avenue
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| Posted: Wed Sep 05, 2007 7:40 am Post subject: |
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| Quote: |
| I sincerely hope the Americans fully keep their distance. |
I suspect that the White House right now is currently more in tune with Joo's thinking than with your own. Bush desperately needs a foreign policy success story for the history books. My guess is he'll take some sort of minor and basically meaningless military and/or economic actions against Venezuela, and then give himself the credit when Chavez's inevitable departure from office occurs. |
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caniff
Joined: 03 Feb 2004
Location: All over the map
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| Posted: Wed Sep 05, 2007 8:10 am Post subject: |
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| On the other hand wrote: |
Bush desperately needs a foreign policy success story for the history books. My guess is he'll take some sort of minor and basically meaningless military and/or economic actions against Venezuela, and then give himself the credit when Chavez's inevitable departure from office occurs. |
I don't think the Americans will be striking Venezuela with military force quite yet.
Why? They are doing a good enough job screwing themselves up on their own. They don't need any help. |
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