Expert Cites US Dollar’s Positive Effect on Venezuelan Bolivar

The Venezuelan bolivar is among the most devalued foreign currencies in the world. However, with the Government of Venezuela taking action recently, this official currency of the South American country obtained some recovery.

 

During this time of global inflation, we want to help our readers stay updated with the current events in the foreign exchange market. We believe this report will help them comprehend how to cope in these economically challenging times, especially if they hold Venezuelan bolivar units.

 

According to the foreign exchange news posted online by Taiwan-based news outlet The Taipei Times, Venezuela’s citizens are grappling with high inflation. Last year, the inflation rate reached 686 percent, which is the highest in the world.

 

Nevertheless, such a figure was a considerable improvement on the 130,000 percent in 2018, 9,585 percent in 2019 and 3,000 percent in 2020. Delcy Rodriguez spoke to parliament amid these economically challenging times.

 

The Venezuelan vice president and economy and finance minister said that the country’s legal tender is and will continue to be the Venezuelan bolivar. At the time of writing, US$1 is equivalent to 4.34 Venezuelan bolivares.

 

Since October, the exchange rate against the US dollar has moved from 4.18 Venezuelan bolivares to 4.32 Venezuelan bolivares. This scenario demonstrates a depreciation of merely 3.24 percent.

 

Additionally, that exchange rate compared favorably to the depreciation of over 95 percent in each of the previous three years and 76 percent last year.

 

Cesar Aristimuno is Director at consultancy company Aristimuno Herrera and Associates. He discussed the significant impact of the US dollar on the Venezuelan bolivar.

 

The Venezuelan Government prohibited the official currency of the United States for 15 years. The US dollar was once scarce and highly prized.

 

It exchanged hands on the black market for considerably more than the official exchange rate. Then, in 2019, the Venezuelan Government was forced to lift the US dollar ban as the South American country suffered a cash flow crisis.

 

Over the past five months, the Banco Central de Venezuela, which is Venezuela’s central bank, has injected US$2.2 billion into the internal market, per Aristimuno Herrera and Associates.

 

Aristimuno affirmed that the Venezuelan Government’s injection of the official currency of the United States has beneficial impacts. He remarked that offering more US dollars than there are demand results in the stability in the exchange rate.

 

Aristimuno relayed that the US dollars had come from an increase in revenues from Venezuelan oil due to a limited increase in production and rising crude prices.

 

Since October 2021, the Banco Central de Venezuela has acknowledged 29 “interventions” but without giving details of the amounts. It slashed six zeros off the Venezuelan bolivar that time, making one new Venezuelan bolivar worth a million old ones.

 

The Venezuelan Government cited that such a measure would improve faith in the local currency. The authorities also imposed a 3-percent tax on foreign currency transactions and cryptocurrencies at the same time.

 

We are pleased with the mitigating effects the injection of the US dollar on the Venezuelan economy has on the Venezuelan bolivar. However, we agree that this scenario also comes with disadvantages caused by inflation.

 

We recommend the Venezuelan Government continue monitoring the Venezuelan bolivar’s situation and stay proactive with the helpful measures. In this way, the ordinary people of Venezuela can get the assistance they need against the repercussions of inflation and national currency devaluation adversely impacting their daily lives.

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