CARACAS, Tuesday October 30, 2012 | Update

Think tank Ecoanalítica forecasts 46.5% devaluation in Venezuela in 2013

A possible devaluation will generate USD 19.56 billion to the Venezuelan government

The increase in the foreign exchange rate would generate incomes amounting to USD 19.56 billion (File photo)
Tuesday October 30, 2012  12:02 PM
Expectations concerning a possible devaluation for 2013 in Venezuela are increasing. The growing fiscal deficit and pressure on the foreign exchange market might lead the government to increase the exchange rate after the upcoming gubernatorial and local elections, to be held in December 2012 and April, 2013, respectively.

Think tank Ecoanalítica forecasts devaluation by 46.5% for 2013. Based on its estimates, current foreign exchange of VEB 4.30 per US dollar will go to VEB 6.30 per USD. The increase in the foreign exchange rate would generate incomes amounting to USD 19.56 billion in one year, since the government would get more Venezuelan bolivars per petrodollar.

Currently, the Venezuelan fiscal deficit amounts to 15% of GDP or USD 40 billion. The devaluation would partiality reduce fiscal deficit. However, devaluation would also entail inflationary pressure, which the government would have to tackle by adjusting the prices of controlled products.

Private imports will also be hit if devaluation is implemented in 2013, since the exchange rate of foreign currency bought through the Transaction System for Foreign Currency Denominated Securities (Sitme) may grow from VEB 5.30 to VEB 7.10 per US dollar, according to Ecoanalítica estimates.

Translated by Andreína Trujillo
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