Venezuela Devalues Its Currency 32%
The currency wars are heating up.
Venezuela devalued its currency for the fifth time in nine years as ailing President Hugo Chavez seeks to narrow a widening fiscal gap and reduce a shortage of dollars in the economy.
The government will weaken the exchange rate by 32 percent to 6.3 bolivars per dollar, Finance Minister Jorge Giordani told reporters today in Caracas. Companies with operations in Venezuela, including Colgate-Palmolive Co., Avon Products Inc. and MercadoLibre Inc., fell on the announcement.
“Any tackling of the massive economic distortions, even if far more is required, is positively viewed by markets,” Kathryn Rooney Vera, a strategist at Bulltick Capital Markets, said in an interview from Miami. “We expected more and more is indeed needed to correct fiscal imbalances and adjust economic distortions, but this is something and there may be more to come.”A spending spree that almost tripled the fiscal deficit last year helped Chavez, 58, win a third six-term term. The devaluation can help narrow the budget deficit by increasing the amount of bolivars the government receives from oil exports. Chavez ordered the move from Cuba, where he is recovering from a fourth cancer surgery, Giordani said.
This serves as a reminder how devaluations are announced after-the-fact. The average Bolivian's bank account just got 32% poorer this afternoon.
This is why holding at least some gold & silver now -- in advance of a surprise currency devaluation in your home country -- is simply prudent insurance.