VEF: Devaluation Forestalled

July 2008 | Currency Forecast

The weakness of the Venezuelan bolivar in the parallel market has been well-documented. Its black-market value has fallen dramatically since the currnecy was initially pegged to the dollar in 2005, from VEB2,150/US$ to its current level of VEB5,750/US$. While the parallel rate has seen some strength recently from a low of almost VEB7,000/US$ as the government has issued a large amount of dollar denominated bonds, allowing investors and business much-needed access to dollars, we do not expect to see this appreciatory trend to continue. The currency remains massively overvalued and the health of the economy relies, to some extent, on

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