Monday, February 11, 2013

Venezuelan Govt Devalues Currency Despite Popular Backlash

After weeks of postponing a move many economists said was inevitable, the Venezuelan government on Friday finally ordered the devaluation of the country’s currency. This is the fifth time that the government has devalued the Venezuelan bolivar since Hugo Chavez took office in 1999, and will lower the exchange rate by 32 percent to 6.3 bolivars per dollar beginning Wednesday.

Reuters reports that officials made the announcement on Friday because it preceded a four-day weekend in Venezuela, a likely bid to lessen political or market backlash. The success of this effort seems to have been limited, however, as many shops in the country reportedly saw a wave of panic buying in response to fears of price increases.

While the move is intended to make a dent in Venezuela’s budget deficit, it will likely also fuel inflation, which is already at 22 percent. The jury is still out over how problematic this will be for the government, however. The New York Times points out that “surging inflation” could cause political problems for officials, although the paper also reports that many analysts believe voters blame the Chavez administration more for widespread food shortages than inflation.

But the Center for Economic Policy and Research’s Mark Weisbrot contends that inflation may be limited.  He notes that the Chavez government’s largest devaluation, in January 2010, caused mainstream analysts to predict that annual inflation would jump to 60 percent, while in reality it briefly peaked at around half that and then fell over the next two years.

The anti-Chavez camp has attacked the devaluation, framing it as proof of economic mismanagement by the government. Opposition leader Henrique Capriles accused the government of resorting to devaluation in order to make up for public funds spent on Chavez’s presidential campaign in October, echoing corruption allegations made last week.

Another opposition figure, Leopoldo Lopez, denounced the move as a “paquetazo rojo,” or “big red package,” a reference to Chavez’s claims during the lead-up to elections last year that the opposition would institute a “big package” of International Monetary Fund-style restructuring measures if elected.

This argument, that the government is instituting the same reforms it had previously warned against, has gained traction among Chavez supporters as well. El Nacional reports that a number of left-wing opinion leaders and traditionally pro-Chavez sites like Aporrea.org have questioned the devaluation and asked how the government can reconcile it with its embrace of “21st century socialism.”

If this dissatisfaction continues to spread, it could take a toll on Vice President Nicolas Maduro’s popularity, and ultimately his ability to fill Chavez’s shoes in his absence. In the event that Chavez dies or is deemed unfit for office, winning the subsequent constitutionally-mandated elections might be an uphill battle for Maduro.


News Briefs
  • After the historic announcement today by Pope Benedict XVI that he will be the first pope since 1415 to step down, speculation has begun over whether he could be replaced by a Latin American.  Spain’s ABC notes that the College of Cardinals has more Latin American members now than ever before, and Reuters reports that two Latinos -- Brazilian Odilo Scherer and Italian-Argentine Leonardo Sandri -- are among the potential candidates.
  • The NYT reports on the effect of a new freedom of information law in Brazil, which requires government agencies to disclose the wages of employees at all levels. The measure has revealed that thousands of public employees in Brazil are making salaries above the constitutionally-mandated limit of $13,360 a month, fueling criticism of public-sector unions and the strong legal barriers to firing government workers.  
  • The Washington Post takes a look at new incentives for migrants to cross the U.S./Mexico border now, as a general consensus over the need for immigration reform grows in Washington. While border crossings are currently at an all-time low and a sluggish economy ensures that there will be no major surge, the Post suggests those attempting to cross (many of whom have families living legally in the U.S.) are hoping to take advantage of new reforms.  
  • With Colombian media reporting that attacks on the country’s security forces and infrastructure by Revolutionary Armed Forces of Colombia (FARC) are increasing, the rebels have denied that their actions have caused a “crisis” at the negotiating table in Havana, as some have suggested. Meanwhile, Silla Vacia asks five Colombian politicians and analysts about the real impact of the FARC’s actions on peace talks.
  • Caracol Radio reports that Colombia’s chief prosecutor, Alejandro Ordoñez Maldonado, has come out against a measure which would legalize possession of small amounts of illegal drugs, which was proposed by a committee created by President Juan Manuel Santos.
  • Peru’s La Republica reports that the Peruvian comptroller has found that the country’s army had corrupt dealings with an Israeli contractor hired to train special forces in the country in 2009. According to the paper, the scandal can be linked all the way to the top leadership of Peru’s armed forces, as well as a number of high-level figures in the Defense Ministry.
  • El Periodico and the AP report that the Guatemalan government on Friday declared a national emergency over the spread of “coffee rust,” a fungus which has taken a massive toll on the country’s coffee crop. President Otto Perez announced that his government would provide $14 million of aid to coffee growers, much of which would go to instructing them on how to prevent the disease and stop its spread. Perez also warned that if the proper safeguards aren't taken, coffee production in 2013-2014 our production could drop by 40 percent.
  • Mexico’s Council for Public Security and Criminal Justice has compiled a list of the 50 most violent cities in the world. The top ten are all in Latin America, and for the second consecutive year the list is topped by San Pedro Sula, Honduras, which saw a homicide rate of 169 per 100,000 inhabitants.
  • On Friday, Honduran President Porfirio Lobo deployed the military to Tegucigalpa and San Pedro Sula, the two largest cities in the country, in order to crack down on rising crime there. He also accused local media of damaging the country's image internationally, saying the violence in the country receives too much coverage.
  • The Associated Press profiles the reaction in Cuba to Venezuelan-owned news channel Telesur, which has been available live on the island for 12 hours a day since January 20th. The AP claims that the channel “gives islanders a close-up look at the more modern, messy, consumer-driven world outside.”