Televisions and appliances were the most sought after in the day Saturday in Guyana and elsewhere in the country

*** The change Bs.F. 4.30 per dollar governed for consumption in foreign travel and commerce.

*** Finance Committee of the NA said that the setting will allow the Government to finance public expenditure.

*** Analysts reiterated that the measure was more than expected, but will generate a spiral of inflation that will impact citizens.

Maria Ramirez Cabello
mramirez@correodelcaroni.com
Photo Tomas Gonzalez

The news of the devaluation was a surprise, not because there was no need to adjust the exchange rate frozen since 2005, but by the reluctance that for months had the Executive against the measure.

The people reacted-this Saturday going to the supermarket and appliance stores and computer equipment for use before the imminent price increase, while industrial highlighted positive action, but also the concerns that arise when the announcement at Friday night by the president.

The devaluation of the currency bolivar fuerte 2.15 to 2.60 per dollar, on one level, for priority sectors among which food and health and Bs.F. 4.30 for bouquets as trade, electronics and textiles, represent adjustments of 20.9% and 100% respectively.

The first change will be used for a range of economic sectors, among which are: food, health, science and technology, machinery and equipment (library, school) and everything having to do with imports in the public sector , remittances to students abroad, consulates and embassies, and retirees and pensioners.

The automotive, trade, telecommunications, chemical, metallurgical, computer, electronics, graphic, electrical, textiles, services, construction, snuff and drinks, among others, should work according to the second level.

Positive Points
The president of the Venezuelan Confederation of Industries (Conindustria), Carlos Larrazabal, said in telephone interview, Correo del Caroni, with the devaluation of the product originated as strict exchange rate anchor, introduced in 2003, who could not submit the rise inflation and also caused an overvaluation of the currency.

"With the deterioration of the productive apparatus in which exports were uncompetitive and, Guyana is a reflection of that, the measure becomes a positive correction on that side, and is also positive that the Government has recognized that there are large imbalances in the economy. "

The business leader added that the laudable attempt to regain the level of exports of the country but warned that this will not happen overnight, especially considering that many exporters lost their markets, the export structure is impaired, among other factors.

"Devaluation is one of the legs of the country's economic problems. It requires consistent exchange rate and monetary policy further to attack the root of inflation and avoid further increases.

Concerns arise
Following the announcement of the devaluation, several concerns have arisen within the industry. First, they worry about how it is to make the payment of the debt of the Foreign Exchange Administration Commission (Cadivi) with this bunch, that estimate is between 5 and 8 billion dollars at the present time.

"If you pay to 2.60 or 4.30 will decapitalise companies," warned Larrazabal.

Another industry concern is that public sector imports shall be covered by the first level of the dual system, to Bs.F. 2.15 per dollar, while many branches of the private sector will have to import their goods at the rate of Bs.F. 4.30 per dollar, all of which surely could create unfair competition and affect the private sector.

"Policies are needed reliable and consistent. Last night (Friday) there was no talk of legal certainty, there was talk of enhanced productivity but a week before attacking the private company (...) and while there is no consistency there will be no climate confidence.

Public expenditure
The vice chairman of the Standing Finance Committee of the National Assembly, Simon Escalona, said that three positive aspects arising from the exchange announcement: the incentive to exports, the possibility of continuing to finance social investment and the "unspeakable goodbye to the dollar.

"With this devaluation, the Executive will finance public expenditures that are social programs, investment in health, education and culture," Correo del Caroni drew.

A's opinion, the exchange rate adjustment should not impact on the gross price of goods and services. Although the adjustment of the first level of the dual system is 20.9%, Escalona said the inflationary impact on food-chains subsidized by the government-will be "zero", while the private sector "should sincerely current prices.

The President said the government will intervene in the exchange market to prevent speculative foreign exchange management. The vice chairman of the Finance Committee of the NA said, "With these measures we can say goodbye to the black dollar, the dollar side, the unnameable.

He stressed that the extent of devaluation should be published in Official Gazette and, surely, will generate adjustments in the budget 2010 and also motivate reform Exchange Crimes Act.

Inflationary impact

With respect to the impacts of inflation, the president of Conindustria, Carlos Larrazabal said that there may be a mixture of results.

Companies importing free dollar, could cut prices of the products if they have access to official dollar to Bs.F. 2.60 or Bs.F. 4.30 as appropriate, whereas those acquiring foreign products with preferential currency will have to adjust the price of their products, according to the devaluation of 20.9% to 100%, depending on the sector.

Several analysts have argued that the devaluation will generate more inflation and impoverishment, as well as resources to the Government to finance its spending, just one year as the 2010 electoral court.

Taking its forecasts several Guyanese took to the streets this Saturday to buy some products for the home, before adjustment to reflect the change of control. "I came early to buy a plasma TV and were not the brand I wanted. I chose this also is good, because everything will go up," said one shopper, who was in a long queue in the computer area of the chain Makro.

A seller who declined to be identified said Saturday he felt like a Christmas day due to high turnover. "People have been mainly TVs, DVD, home electronics and some power plants," he said.

What does devalue the currency?

The devaluation was the decision of the monetary authority to reduce the value of national currency to the value of foreign currencies. It manifests as an increase or adjustment in the exchange rate, so much is needed to acquire bolivars same amount of dollars or other foreign currency, according to the Economic ABC Central Bank of Venezuela.

Past, they needed Bs.F. 2.15 buy a dollar, now require Bs.F. 2.60 or Bs.F. 4.30 per dollar.

Why is devalued?

The Minister of Economy and Finance Ali Rodriguez Araque, said that all goods have price adjustments in recent years. In that sense, the same should happen with the amount of bolivar-dollar parity, or the price of the dollar.

"The last adjustment was made was in 2005, so it became necessary to do so on this occasion," he said.

How far is beneficial for the economy?

National authorities ensure that they obtain the main incentive that Venezuelan exports have lost competitiveness to other countries due to the overvaluation of the currency.

Analysts, on several occasions, which was more attractive to import than to produce in the country due to high levels of inflation. They hope to replace imports.

Which sectors are governed by the exchange rate to Bs.F. 2.60 dollar?

The first change will be used for a range of economic sectors, among which are: food, health, science and technology, machinery and equipment (library, school) and everything having to do with imports in the public sector , remittances to students abroad, consulates and embassies, and retirees and pensioners.

Which sectors are governed by the exchange rate to Bs.F. 4.30 per dollar?

The automotive, trade, telecommunications, chemical, metallurgical, computer, electronics, graphic, electrical, textiles, services, construction, snuff and drinks, among others, should work according to the second level.

What are the cons of adjusting the exchange rate?

Considering that adjustments are of 20.9% for the first level (EUR 2,60 / U.S. $) and 100% (EUR 4,30 / U.S. $) at the second level, economists the country agree that prices will soar. "A car that was brought to 2.15 will bring now to 4.30, twice," said economist Cesar Aristimuño.

"This will have a strong effect on inflation at all costs, because some things will increase 21% and 100%," said Jose Guerra, director of the School of Economics of the UCV.

Does the consumer how to travel abroad for work?

The Minister for Planning and Development Jorge Giordani, said this Saturday during the plenary of the United Socialist Party of Venezuela-that the exchange rate to be used for remittances student, pensioners and retirees abroad will be willing to Bs.F . 2.60 dollar, while the consumer to travel abroad and electronic payments is the Bs.F. 4.30.

So packages overseas via the Internet and purchased products become more expensive.