Ecoanalítica: Exchange adjustment is encouraging the import
Saturday, February 20th, 2010
The firm said that while problems are resolved as political instability in Venezuela will continue to decrease competitiveness.



Analysts agreed that Venezuela's economy is practiced at all ports that promotes domestic production. Photo AFP Ecoanalítica The private firm said that despite the devaluation of the bolivar, the country still has an exchange rate that encourages imports and discourages domestic production for both local consumption and for export.

The consultancy said in its latest weekly report that in assessing the appreciation of the bolivar in respect of the weighted exchange rate of foreign trade, the Venezuelan currency overvaluation went from 45.2% to 29.2% after the devaluation .

According to Ecoanalítica, the exchange rate is not everything, "if it's ask the Chinese, who in recent years have set a depreciated exchange rate, ie the yuan / US $ is above its price equilibrium, in contrast to our valued exchange rate that is below the real exchange rate (RER). With this, China encourages the competitiveness of their exports and discouraging imports.

The firm said that although the devaluation may substantially increase the export business for the few private sector participants still exporting, "the gain in competitiveness due to devaluation is not a sufficient incentive for producers to establish new export purposes because the business environment is very hostile. "

In the weekly report, mentions a survey conducted by the World Economic Forum reveals the five elements that hinder business in Venezuela: "exchange controls, political instability, inefficient government bureaucracy, labor regulations and inflation .

The firm found that while policies are not made in order to solve these problems, "our competitiveness will remain continuously decreasing until the next devaluation."

Balance distant
Ecoanalítica said that at the end of 2009, the bolivar was overvalued by 67% compared to the U.S., namely that "the exchange rate would offset the higher inflation in Venezuela in order to make our goods competitive in the U.S. tradables would Bs.F. 6.2 per dollar.

With regard to other trading partners, overvaluation for Colombia stood at 48%, "so the TCR between Colombia and Venezuela should be Bs.F. 4.1 per dollar, Brazil would need an exchange rate of Bs.F. 4.3 per dollar, while "for China and Mexico would not be very different, with an overvaluation of 45 and 55%, implying a TCR of Bs.F. 3.9 per dollar and Bs.F. 4.8 per dollar, respectively.

In favor
Although the consultant clarifies that the exchange rate adjustment does not generate sufficient incentives for the establishment of new producers exporting purposes, recognize that with the devaluation "private exporters are virtually doubling its profitability in bolivar, as they spend to obtain 2.15 bolivar by dollar to get 4.30 to the dollar. In this sense it's much better to produce for export business.

In the field of imports, Ecoanalítica states that 51.8% of the imported goods and services get a devaluation of 21%, ie just over two thirds of what had previously been imported to 2.15 to the dollar.

"Continuing with our projections more than a third of what was imported via the parallel receive 4.3 bolivar to the dollar and the rest remain in the parallel," he said. (MRC)