Venezuelan Government Implements Stealth Devaluation of 44.2% For The Private Sector

January 8, 2014

photo(4)

44% chopped off the Bolivar, at least for the private sector. Note cut is to scale :-)

Just a short note on the fact that the Venezuelan Government just implemented a stealth devaluation by inviting to a Sicad auction (where the price is almost twice the official rate of exchange) for the following items:

-Automotive Sector

-Food Industry: Corn flour, wheat flour, corn oil, rice, pastas and cereals.

-Paper, carton and wood

-Health Sector and raw materials for the pharmaceutical sector and vitamins, including ophthalmology.

Clearly, the Government does not want to announce a devaluation which shows there is some fear. The problem is that if companies imports at Bs. 11.3, the Sicad rate raw materials for regulated and controlled items, these prices have to be raised. The same with pharmaceuticals, etc.

Of course, we don’t know if it is that the Government plans to devalue later, will keep importing for itself at Bs. 6.3 per US$, what will happen with Sicad, if all imports will be done at Bs. 11.3 per US$ etc. But for now, this is simply a devaluation of  44.2% for the private sector, which will make inflation soar again.

But the distortions remain in place.

34 Responses to “Venezuelan Government Implements Stealth Devaluation of 44.2% For The Private Sector”

  1. Sicad Devaluation Says:

    And the sad part is that even at this maxi rate, they’ll be devaluing for a while still with the parallel rate at 60+

  2. captainccs Says:

    The picture looks like brain surgery Castro-Communist military style.

  3. Virginia Says:

    As ever, sheer insanity, and the end in sight…

  4. luis Says:

    Does this mean, public companies will still be able to disclose their VEN revs at 6.3 or the new rate?

    • moctavio Says:

      No, it means exactly the opposite. In fact the moment that the Sicad rate became public, public companies have to readjust all their financials, except dividends to the new Sicad rate. Dividends as long as the decree says they are “given out” at Bs. 6.3, they can account for it at that rate.

      • carlos Says:

        As far as I know dividends through Cadivi were not granted at all during the last 6-7 years. Multinationals use to book earnings and dividends at official Cadivi exchange rate but these are actually monoply money earnings and dividends. Local bottom lines are the most profitable in the world…at official rate. Reality check : some day they will need to impair these accumulated earnings by a huge 1000 percent or 10 cents at the dollar..

  5. Glenn Says:

    Miguel I have to disagree with your title. There was nothing stealthy about this. You could see ti coming from a mile away.

  6. Shrillary Clinton Says:

    so many articles related to imports….toilet paper, food, car parts, etc etc….honesty…dont you people make ANYTHING down there?

    • JJ Says:

      Although local production has been a problem for many years (Dutch disease), many products were locally made, in particular food. But a government that has systematically attacked, confiscated, persecuted, invaded and asphyxiated private producers, and allowed public companies to drown in corruption and incompetence, has done away with the production that existed. Not to speak of other factors like rampant crime, failing utilities, police and judicial corruption, uncontrolled monetary printing (photocopying would seem apter). A country on the road towards a failed state. But … a new “victory in the revolutionary battle against the oligarchy”!


  7. I see THEE rate stayed the same at 64. So, this devaluation is already discounted in the rate?

    • moctavio Says:

      I dont see dolartoday adjusting the black rate these days. I understand is trading in the seventies.

      This is the rate the Government used to give dollar to for food and medicines to the private sector.


      • Thank you. So it was a real market move then.

        Where can I get the correct current rate (70)? My email is realvalueaccounting@yahoo.com if you cannot state it here. I think you have my email in your contact list.

        Just a side note: I have been asked by a top accountant at one of the biggest business groups in Iran to present a paper with him on introducing IFRS in Iran – at a seminar in Iran. I will of course tell them it can only be in terms of a Daily Index. So, there may actually be some real progress made in a hyperinflationary country with Daily Indexing – which can only benefit Venezuela after that.

  8. Boludo Tejano Says:

    What items can non-governmental entities still import at the old 6.3 rate?
    Or does this simply mean one rate for the government, another for non-government entities?

  9. Rafael Vicente Says:

    Amigo, como que un 44% de devalución, no de Bsf.: 6.30, a Bsf.: 11.30, la diferencia es de Bsf.: 5.00, 5.00/6.30*100, el resultado es de: 79.36%, la devalución, esto en menos de año, la Revolución Avanza, a pasos de Arruinadores, consecuencias del Comunismo.

    • moctavio Says:

      No, una moneda no puede perder el 100% de su valor, segun su calculo, si el cambio hubiera sido de 8 Bolivares, la moneda se hubiera devaluado mas del 100%. El calculo se hace sobre el nuevo valor para medir la devaluacion. La tasa de cambio aumento 79%, pero la moenda solo se devaluo 44%.

      • Milton Says:

        Muy sencillo. El incremento en el precio de la tasa bs/usd es 79.3%. Sin embargo ese el incremento en el precio del dolar. Si invertimos la base a usd/bs, es decir lo vemos desde del punto de vista del precio del bolivar, la perdida de valor es de 44%.

        Antes de la medida el precio del bolivar era: 1/6.3= 0.158 dólares por bolívar.

        Después de la medida, el precio del bolivar es: 1/11.3= 0.088 dólares por bolívar.

        Por lo tanto el precio del bolívar se movio de 0.158 a 0.088 dolares. Esto es equivalente a un cambio (devaluacion) de 44%

        Si se habla de devaluacion lo correcto es utilizar 44%. Si se habla de incremento del precio del dólar lo correcto es utilizar 79.3%

        Un simple juego de palabras.

  10. Jerry Says:

    Are we sure that the FX rate at sicad is 11.3? Where does it say that in the announcement?

  11. moctavio Says:

    The BCV has been announcing the Sicad rate after each auction, since this rate would be used for tourists in Decemebr. The last time it was 11.3 (and all the previous ones) Of course, this time it could be different, but I doubt it.

    See this link, for example:

    http://www.bcv.org.ve/c5/sicad/tdcsicad.xls

    It is a silly link, it downloads a document in your browser

  12. Kepler Says:

    Boludo, can you send me a wee email? Thanks

  13. Dr. Faustus Says:

    Meanwhile, just across and up the pond, another “oil state” has enough money stashed away to make each and every one of its citizens a,….a millionaire.

    http://www.dailymail.co.uk/news/article-2536424/Everyone-Norway-millionaire.html

    How’d they do that without having put Hugo in charge?

  14. CE Rodriguez Castellvi Says:

    Hola buenas noches, usted tiene Alguna informacion del caso Sidetur ?. Alguien esta tomando Alguna accion al respecto ?

    Saludos

    Sent from my iPhone

    >

    • moctavio Says:

      Si, hay un grupo tratando de actuar legalmente, hasta ahora lo han hecho sutilmente, tratando de negociar, pero creo se cansaron ya.

  15. Bruni Says:

    Somehow, even before reading the caption, I knew the note cut was proportional…:-)

  16. Ira Says:

    Totally OT:

    In a previous blog/piece here, I gave my opinion on the power of the unexpected. That it’s the surprises of history which change the future.

    Monica’s death won’t do it alone–but should an additional incident, or two, take place within the next few weeks…maybe even months…all hell could break loose.

    • arco Says:

      great opportunity for the opposition, one would think?

      • Ira Says:

        Well, you don’t want to make it political, but the reality is still there.

        These things are best left to develop organically, on their own.

        Remember, this fairly typical tragedy for VZ forced Maduro to move up his meeting on domestic security, and this happened on the tragedy’s own momentum–not the result of demonstrations.

        Just wanted to make the point that often, “simple” unplanned and unexpected events, coming totally out of the blue, can turn things upside down.

        Another high-profile murder like Monica’s and all bets are off, because this is what can turn Chavistas away from the dark side.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 12,011 other followers

%d bloggers like this: