Caracas, November 1, 2016 (venezuelanalysis.com) – Venezuela’s parallel market rate rose to the unprecedented level of 1500 bolivars per dollar this past weekend following weeks of steady increase.
The recent fall in the value of Venezuela’s currency comes after months of relative stability on the black market, in which the dollar’s value hovered around 1000 bolivars.
Earlier this year, the Venezuelan government restricted the supply of bolivars in circulation and implemented a floating official exchange rate, which succeeded in temporarily stabilizing the parallel rate.
On October 21, Venezuela’s Central Bank announced a 4 percent increase in the total supply of bolivars, presumably in anticipation of the 50 percent minimum wage increase decreed by the president at the end of the month.
Later that week, the parallel dollar jumped from around 1200 bolivars per dollar to over 1400. By October 31, the black market rate had reached 1506 bolivars per dollar and on Tuesday it climbed further to 1567.
According to prominent Venezuela expert Gregory Wilpert, the latest depreciation of the bolivar is as much political as it is economic.
“It’s hard to say how much is political and how much is economic, but if I had to guess, I would say it’s about 50-50,” he told Venezuelanalysis.
In particular, the sociologist highlighted the “anxiety of the political situation”, including fears of a imminent coup, which could be driving the country’s middle class to “get rid of their bolivars even faster than is usually the case.”
Tensions in the country have intensified over the past month following the postponement of the next phase of the presidential recall process scheduled for the last week of October, and an attempt by the opposition-held legislature to begin a unilateral impeachment procedure against the president.
In addition to the floating DICOM rate that currently stands at 659 bolivars per dollar, the Venezuelan government retains a subsidized rate of 10 bolivars per dollar, which is reserved for food and medical imports.
Stagnant oil prices over the past year and a half have drained Venezuela’s foreign reserves, limiting the state’s capacity to sell dollars at its official exchange rates in order to counterbalance the rising parallel rate.