Experts: Devaluation in Venezuela is a pressing need
Think tank Econométrica remarked that devaluation is vital to prevent shortage from worsening
"The forex adjustment is necessary to partially reduce the accumulated fiscal and monetary imbalances, but on top of all, the adjustment is vital to avoid excessive shortage of US dollars and goods," Econométrica remarked.
The firm explained that in order to avoid basic goods shortage, an adjustment in the price of regulated staples will not be enough. It is imperative to devaluate the currency as well.
"Upon devaluation, the value of the US currency rises while forex demand to meet the supply of unnecessary commodities drops as people are not willing to pay a higher price per US dollar. With this move, there will be more US dollars to meet the supply of essential products."
The report explained the possible impact of shortage on the markets, highlighting that "common citizens usually blame entrepreneurs for inflation. The Government has stepped up as guarantor of supply. This explains the incorporation of different governmental food distribution companies enterprises such as Mercal, Pdval, among others."
In the current political scenario, "failing to devaluate the currency would not only be an economic mistake, but also a political error as it implies that the Government will have to pay the highest cost: shortage."
Translated by Jhean Cabrera
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."