You have to feel the pain of the Venezuelan citizen who not only lives under such an oppressive government, but sees his income unable to cover ever increasing food costs and his saving destroyed without the ability to move out of local currency.Yes, the solution is dilution!
I received this from just such a citizen bemoaning his fate as the devaluation is expected to continue all of next year.
Intended to spur local production in the largely import-dependent nation, the announcement followed a central bank estimate that the economy contracted 1.9 percent during 2010 -- Venezuela's second straight year of recession.
The central bank said it would eliminate the exchange rate of 2.6 bolivars per dollar, which had been available for essential imports such as medicines and some foods, accounting for roughly a third of all forex transactions.
The socialist government hopes the move will attract foreign funds, improve its balance sheet and make the local private sector more competitive.
Venezuela already has one of the world's highest inflation rates, estimated by the central bank at 26.9 percent in 2010. The price rises threaten to alienate Chavez's core support in the country's slums and poor rural areas.
As of January 1, in a still-complicated currency control system, dollars will be available at state-controlled rates of 4.3 bolivars per dollar for some preferential goods and 5.3 bolivars via the central bank's SITME exchange system.
The bolivar was previously devalued in January of this year, meaning many foreign companies in Venezuela took a cash hit to their 2010 results.
That move had sent Venezuelans rushing to shops to make purchases before prices rose, but there was no immediate evidence of similar panic buying on Thursday.
In office since 1999, Chavez has blamed the country's economic problems on the global financial crisis as well as on reduced oil exports from OPEC quota cuts.
He contends, however, that strong social indicators show socialism is benefiting Venezuela's 29 million people and hauling many out of poverty.
Critics say Chavez is leading the economy to ruin citing nationalizations, the byzantine system of currency controls, subsidized oil supplies to allies like Cuba and China, and other policies aimed at entrenching his socialist agenda.