Why were Venezuelans on a shopping spree last weekend? On Friday, the government announced the introduction of a multi-tiered exchange rate. How does it work you may well ask? There will be three rates. The official value of the dollar will be fixed at 2.6 bolivars. This rate will be reserved for essential imports such as medicine and food. Essential goods will be traded at the "oil dollar" pegged at 4.3 bolivars. The third floating rate will be managed by central bank intervention. This rate has previously been known as the parallel rate and currently values the USD at just over 6 bolivars.
Opposers point out this tiered system will make goods more expensive for average citizens while the government's oil export earnings double. Venezuela's currency is the "bolivar fuerte" (Pl. "bolivares fuertes") which has been the new currency since January 2008 (when the ISO code changed from VEB to VEF). The new exchange rate system is effectively a devaluation.
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