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Venezuela applies double standard to bolivar exchange rate

Published time: January 23, 2014 12:46
AFP Photo / Leo Ramirez

AFP Photo / Leo Ramirez

Venezuela has revamped its tough currency controls. Only importers of priority goods like food and medicine will be able to buy dollars at the official rate of 6.3 bolivars, everyone else will pay nearly double.

The exchange rate for essential goods such as food and medicine will remain at the regular 6.3 bolivars per dollar. However, Venezuelans traveling or buying airline tickets will be faced with an extremely unfavorable rate of 11.3 bolivars, known as the Ancillary Foreign Currency Administration System (Sicad) rate.

The move aims to crack down on the black market rate which now stands at about 10 times higher the preferred rate, according to Oil Minister Rafael Ramirez. Billions of dollar in savings could be used for purchasing basic needs.

"Should we give dollars to people who resell them on the black market, or should we bring in medicine? Should we give dollars to travelers, or should we bring in food?" Ramirez said.

There have been a flood of Twitter debates calling the government move nothing more than disguised devaluation that will increase the cost of living, with the underlying problems remaining unresolved.

"It looks like a devaluation, it quacks like a devaluation, it hurts like a devaluation: it's a devaluation," as Reuters quotes one of the Twitter users.

Critics also say the measures could further boost inflation in Venezuela that stood at 56.2 percent in 2013 - already the highest in the Americas.

Ramirez, however, insisted it was not a devaluation of the bolivar, but a measure to avoid a crisis, and boost the economy.

He said just 20 percent of Venezuela’s dollar needs will now be subject to a Sicad rate. Meanwhile, 80 percent of the country’s food requirements, agriculture, health and education will be covered at the official 6.3 rate.

"So we can't call this a devaluation, that is the enemy's spin," he told state TV. "We ask our people for understanding, we would never betray them," Ramirez said.

To show how different exchange rates impact normal consumers in Venezuela, Reuters calculated that a McDonald's Big Mac Combo would cost $2 at a black market exchange, $14 at the Sicad rate and $25 at the official exchange rate.

Comments (9)


rdider 26.02.2014 21:04

Ramiro 24.01.2014 02:56

The country is doing fine after decades and decades of evil capitalist policies. Fortunately, the resources in Venezuela have allowed the left government to buy arms and support it's policies. Long live Maduro, Chavez! Thank you Fidel! May FARC-EP succeed to stopping capitalism in Colombia.


If you think creating an environment with high inflation and highest murder rates in the world is fine, then Fidel has succeeded at playing Maduro for a puppet.


Nativo Mexicano 24.01.2014 23:24

Maybe (fiat money) dollars will be worthless since nothings backs up the dollar. I bet in the future only one currency will be demanded, and this currency is GOLD.
Sucres, Bitcoins, Tunims, ETFs, Euros, etc... all have been inventions in a desperation to control "money". How about we all humans demand a new currency instead of gold, how about Gallaros (Money valid in all galaxies). Now you get the point.


Argentimer 24.01.2014 03:23

Depends on whom you ask. I know Venezuelan expats (not rich) who think otherwise. I prefer Pepe Mujica's balancing act - improving conditions for the poor AND allowing the Uruguayan professional/middle class to grow, and Pepe isn't interested in becoming rich. He's just content with his simple life on his wife's chacra and providing intelligent leadership in a country that has suffered PLENTY of evil capitalist policies. Dilma is also amazing, following Lula's brilliant path. Unfortunately some people can't handle ambiguity, and stay stuck in ideological rigidity. And when good people who believe in the cause flee?

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