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In this case the devaluation is almost entirely driven by Venezuela specific issues. This can be clearly seen by the fact that the US dollar exchange rate is re
by spikels 10y ago
In this case the devaluation is almost entirely driven by Venezuela specific issues. This can be clearly seen by the fact that the US dollar exchange rate is relatively stable versus almost every other currency while the Venezuelan currency is rapidly depreciating versus every other currency.
So you have it backwards. This almost entirely due to poor economic policies by the Venezuela, not something "external".
While the fall in oil prices has exacerbated the problem the core issue is the policy of plugging a huge budget deficit by printing Bolivars. This almost directly causes the huge local inflation and rapidly falling exchange rate as measured in the black market (i.e. the "true exchange rate). Combine this with strict currency controls (i.e. "fake" government set exchange rates that are not available to most people) you get shortages since Venezuela must import many essentials. [EDIT: And, as pointed out below, price controls are a key cause of the shortages.)
This situation while somewhat complex is a textbook example of these issues.
- ptaipale 10y agoAnd in addition to deficit and currency controls, also price controls which have destroyed markets. Then you have a political police enforcing silly laws about companies will have to continue to produce something even when it is economically unfeasible. In the short term you get some physical deliverables like bread next week; in the long term you get a dysfunctional economy.
- foobarian 10y agoThis whole mess is causing us headaches at work, because some LatAm sales people requested a second exchange rate for Venezuela since the real one is so broken. But a lot of the code assumes a 1-1 country-currency mapping, so if we give in we'll end up with special cases for Venezuela everywhere... sigh.
- lokedhs 10y agoDon't you have support for other types of non-national currencies like XAU (gold) and SDR (IMF special drawing right). There are also other countries with multiple currencies. Like Zimbabwe that uses the USD and SAR as well as some others.
- kalleboo 10y agoThere are also the situations where a country redenominates their currency and renames it in the process - e.g. the Mexican Peso went from MXP to MXN (the N standing for New). Zimbabwe has worked itself through ZWD, ZWN, ZWR, ZWL during various redenominations.
- foobarian 10y agoRMB and CNY are another one. Then there is the cent-less Japanese Yen...