Deja Vu as Chavez Devalues "Bolivar Fuente"

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.

Plans to Nationalise Bank of Venezuela

Hugo Chavez, president of Venezuela, has announced plans to nationalise Bank of Venezuela (Banco de Venezuela), one of the country's largest banks currently owned by Grupo Santander.

This is not the first nationalisation of Banco de Venezuela. It was nationalized in 1994 after a massive banking crisis which bankrupted 60 percent of the banking sector, privatized again 2 years later in 1996 and bought by the Spanish banking giant Grupo Santander for only 430 million US dollars.

Chavez was quoted as saying "Ladran, luego cabalgamos" (the dogs bark, therefore the caravan is moving).