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Hugo Chavez announced today that effective immediately, the Venezuelan Bolivar is devalued by 100% versus the US dollar.
With this measure, all of Venezuela's oil income will immediately double. That was easy! Why bother with convoluted stimulus programs and mortgage purchase programs!
There are now actually two types of exchange rates, one lower at 2.60 for 1 USD for priority items (food), and one higher at 4.30 for all other items.
If you think these measures cannot be table in more developed nations, please reconsider. Slowly or at once like Venezuela, it is the only way to repay the debts.
Unlike in Argentina, the central bank bent to the government's wishes and agreed yesterday to transfer $7 billion in reserves to the government.
Bloomberg reports that the yield on Venezuela’s 9.25% bonds due in 2027 fell 12 basis points, or 0.12%, to 12.13%. The price on the securities climbed 0.70 cent on the dollar to 79.20 cents, the highest since Oct. 29. The bolivar dropped 1.6% in unregulated trading to 6.25 per dollar from 6.15 yesterday.
GDP chart:
Inflation chart:
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