Venezuelan Economy Faces Crisis

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http://english.eluniversal.com/2010/05/17/en_eco_esp_bolivarian-revolutio_17A3888011.shtml

"Bolivarian revolution faces third exchange crisis with tighter regulations

Although the price of the Venezuelan oil basket has hit USD 71 so far this year, foreign reserves have declined by 22.5 percent and available foreign currency is no longer enough to disburse US dollars approved by the Foreign Exchange Administration Commission (Cadivi), transfer funds to the National Development Fund (Fonden) and meet demand in the swap market, where the US dollar has soared, thus boosting inflation.

Analysts explained that demand in the swap market is soaring as corporations are seeking protection from expropriations, interest rates do not preserve the purchasing power of money, and importers, who continue to increase amidst declining domestic production, get less foreign exchange from Cadivi.

The government has tightened controls to address the crisis. The board of directors of the Central Bank will decide the price of the US dollar in the swap market. They will also register each buyer and will manage the supply of US dollars.

At the same time, law enforcement officials are closing the web pages that post the price of the US dollar in the parallel market and are conducting several raids.

Economic experts highlighted that the Venezuelan government's strategy is addressing the effects rather than the causes of economic imbalance. Goldman Sachs said in a report last week that the only way to curb the US dollar price in the parallel exchange market is by increasing the supply of US dollars or by reducing political, economic and social confrontations, in order to reduce demand.

This is the third exchange crisis hitting revolutionary project. On February 14, 2002 the exchange rate system collapsed and authorities implemented 24 percent devaluation in one day. In January 2010, the fixed exchange rate at VEB 2.15 per US dollar sank and, following devaluation, the government set a new dual exchange system that increased the value of the US currency to VEB 2.6 and VEB 4.30 per US dollar.

According to analysts, both devaluations, as well as the present crisis, are marked by the lack of confidence in the Venezuelan economy, which has boosted demand of US dollars and has rendered the exchange rate unsustainable.

http://english.eluniversal.com/2010/05/17/en_eco_esp_bolivarian-revolutio_17A3888011.shtml

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Oil Prices lower too:

"This was the final trading day for the June contract. Benchmark crude for June delivery lost $1.86 to settle at $68.01 a barrel on the Nymex. Prices tumbled as low as $64.24 earlier in the day, the lowest price for oil since July. Oil has shed nearly 22 percent of its value since hitting $86.84 on April 6."

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1. Hey hey hey

Anobody want to call the IMF? We need loans.