Venezuela will replace its three legal foreign-exchange rates with a single valuation of 45 per dollar next year, representing a devaluation of as much as 86 percent, according to Bank of America Corp.
“The government faces no major electoral constraint to a large devaluation of the currency,” Francisco Rodriguez, senior Andean economist at the Charlotte, North Carolina-based bank, said today in an e-mailed research note to clients. “Most of the economic and political costs of such an adjustment were already paid.”
Under a decade-old system of currency controls, the government provides 80 percent of foreign currency to companies and citizens at the official rate of 6.3 per dollar, Economy Vice President Rafael Ramirez reiterated last month. The remaining 20 percent is sold through secondary systems, known as Sicad I and Sicad II, for 10 and 49.3 bolivars per dollar. Companies and individuals who don’t have access to the legal currency mechanisms pay about 65 bolivars on the black market.
Dollar shortages helped pushed Venezuela’s annual inflation to 57 percent in January while emptying shops of basic goods and driving people to daily street protests against the government. By the end of the year, 39 percent of all dollars in the economy will be exchanged at the Sicad II rate, which will weaken to 70 bolivars per dollar, according to Rodriguez.
A Finance Ministry spokesman didn’t immediately reply to a phone call seeking comment on a public holiday.