Fuel prices at the pumps may have gone up by more than 6,000%, but drivers in Venezuela still have the cheapest fuel in the world.
The country’s economy is a disaster.
The government has moved to devalue the Venezuelan Bolivar (VEF) but financial experts are saying President Nicolas Maudro should have done more to bolster the economy a long time ago.
Venezuela has operated a number of exchange rates against the US dollar at the same time.
The president shifted the ‘official’ rate from 6.3VEF to a dollar to 10 to a dollar, devaluing the currency by around 60% at a stroke.
Highest global inflation
This official rate was only available to companies importing essential food and medicine, so the change will not really affect the money in the pocket of the average man in Caracas much, but some prices will increase.
The real rate that applies to the rest of the population was pegged at 200 VEF to the dollar.
The President has order this rate – the Simadi rate – to float freely, which observers comment is what was supposed to happen anyway.
The problem the government faces other than economic incompetence is that the black market rate for the VEF is around 1,050 to the dollar and seen as a truer reflection of the real state of the economy.
Oil has kept Venezuela afloat for many years, and now the plunging price per barrel is bringing the nation’s financial problems into perspective.
The inflation rate in Venezuela is running officially 141.5% – the highest in the world.
Unreliable economic statistics
The International Monetary Fund predicts the cost of living will rise to more than 700% by the end of the year.
Reliable economic data from Venezuela is hard to source.
The central bank released some statistics last month for the first time in a year – which is where the 141.5% cost of living figure comes from.
The IMF reports the country is in recession and that the economy will contract by 8% in 2016, after shrinking 10% last year.
“Venezuela is a key Latin America economy and what happens there is followed elsewhere,” said IMF Director, Alejandro Werner.
“Along with Brazil, Ecuador, and Argentina, Venezuela’s contraction will lead the whole regional economy to shrink this year.”
