Economic adjustments on hold in the current state of affairs

Experts change their minds_ about impending devaluation

For Ángel García Banchs, devaluation is the wisest political step to prevent shortage in a potential scenario of presidential election (File photo)
Monday December 10, 2012  12:07 PM

Venezuelan President Hugo Chávez's report on a new surgery and hinting the possibility of his disability shifts not only the political scenery, but also economic prospects. In the light of the significant fiscal deficit and pressure on foreign exchange, experts had deemed devaluation as imminent. Now, though, the situation is not so clear.

The very Venezuelan leader made an appeal to vote his Vice-President and Foreign Minister Nicolás Maduro, in the event of new election associated to his potential total absence.

"Elect Nicolás Maduro as president. I ask you from the bottom of my heart," Chávez said on Saturday evening.

Sure enough, there is the possibility of a new election where the government would bet on its stay in office. Such scenario makes Asdrúbal Oliveros, the director of think tank Ecoanalítica, revise the forecasts for early 2013.

The economist fears that the economic issue will remain in the second place. As a result, he is afraid that no adjustments will be made soon, as previously thought.

"Any economic decision will be based on a strict political calculation and anticipating the effects on Chavezism in the future," Oliveros said.

Therefore, notwithstanding the fiscal deficit, estimated at 15% of the Gross Domestic Product (GDP), and growing restrictions and pressure on the foreign currency market, the analyst thinks that any change in the fields of taxes, subsidies or foreign exchange will remain on standby.

"You cannot run for election in the middle of (economic) adjustments," he pronounced.
The end of a cycle

Hundreds of thousands of demonstrators took to the streets of Brazil on March 13 to demand the ouster of embattled President Dilma Rousseff, carrying banners expressing anger at bribery scandals and economic woes. A banner read "We don't want a new Venezuela in Brazil."

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