With the New Year came the surprise announcement that Venezuela's President Hugo Chávez would devalue the country's currency, the bolívar, by half. While just about everyone knew that the bolívar was overvalued, Chávez had before flatly rejected any talk of devaluation. The pegged exchange rate - at 2.15 bolívares to the US dollar - provided a nice way to reward political allies with contracts in cheap dollars that could then be sold on the parallel market for up to three times the official rate. Middle class Venezuelans enjoyed weekend trips to Miami that more than paid for themselves with the exchange rate differential, while an entire industry of profiting from the differential was exploited by many. There may not be water or electric service, but there were cheap dollars.

As the price of the bolívar on the black market decreased because of high inflation, however, the endeavor simply became too expensive for the government to maintain, especially with the drop from record-high oil prices a year ago. Chávez has probably known that he would have to devalue the bolívar for a long time now but was just looking for the right time to do so. After getting used to cheap dollars, though, there's probably never a good time to find out that your money is only worth half as much as before.

The devaluation was largely viewed by the international financial community as positive, even as Venezuelans rushed to stores to by flat screen TVs before prices increased. The devaluation will obviously force Venezuela's middle class to bear the brunt of price increases, but the move could give state oil company PDVSA increased flexibility to get its house in order. Oil revenue received by the company will virtually double in local currency, and the government will be able to increase spending as congressional elections approach.

Whether Venezuela's government will let PDVSA get its house in order or if it will try to simply extract all the new revenue to increase spending remains to be seen.

Business owners, forced to pay double to import everything that Venezuela doesn’t produce - and that is actually just about everything - will be wary of the National Guard troops roaming the streets threatening to nationalize businesses that raise prices. But those doing business in Venezuela have been forced to adapt to tough times before and will likely find a way around Chávez's threats.

International oil service companies will also likely emerge as losers as money they are owed by PDVSA will be cut in half when converted into dollars. PDVSA, though, may finally have the cash to at least try and pay some of its debt back.

A preferential exchange rate, meanwhile, will be maintained for food imports and other items deemed essential and probably be used by Chávez's closest allies for profit.

Above all, the devaluation shows that Chávez is being forced to take increasingly risky gambles as his Bolivarian Revolution starts to show real stress points. While he may have once thought that cheap dollars could be paid for endlessly, just like he may have thought delivering water and electricity involved nothing more than flipping a switch, it's clear that Chávez knows those days are over. Venezuela watchers have often wondered how long Chávez's reckless and arbitrary policies could sustain themselves, and the answer seems to be until now.

In a national embarrassment, Chávez was forced last week to suspend programmed power rationing in Caracas after angry Caraqueños, who already faced programmed water rationing, finally appeared to say that they had had enough. Venezuelans have a special tolerance for shortfalls and may secretly like the thrill of finding a box of sugar or eggs on the black market, but it seems like even loyal Chávez supporters may be starting to say that enough is enough.

But Chávez's power should not be underestimated. He controls just about every institution in the country, and the political opposition is weak and constantly facing changes to the rules. The latest devaluation buys him some time - but not a lot - to fix some of the serious problems facing the country. With an economy that imports everything with oil dollars, inflation will continue to be a problem, and Venezuela will face imbalances until a free market exchange rate returns.

Chávez must act quickly to diversify Venezuela's economy, balance PDVSA's books, and return normal water and power service. The fact that he would take the risk to announce such a drastic devaluation makes it appear like he's beginning to get the message.