We’ll get started with this week’s Venezuela : Down The Rabbit Hole segment in just a bit but first, we have something we overlooked last week…Rio Times reported that the parallel exchange rate (black market) for converting bolivares (Venezuela local currency) to dollars is estimated to have increased by about 10% for the month of July, according to financial firm, Sintesis Financiera.
The disparity between the official government rate and the parallel rate (Most Venezuelans use the parallel market as they don’t trust the government) is also increasing to at least 8.5% up from June’s figure of 4.9%. I know it sounds like quite a difference but at one time the difference was hundreds of percentage points, which led to the making of a lot of overnight millionaire Chavistas as they worked arbitrage schemes between the official rate and the black market.
The firm expects the exchange rate trend will raise July’s inflation to nearly 9%. This factor combined with a new law taxing door to door imports (not to mention Maduro’s foreign currency transaction tax) will impact the economy.
The VOF (Venezuela Observatory of Finance) has reported that Venezuela has officially entered a recession (again) highlighting a contraction of economic activity in both Q1 and Q2 of this year. Remember, Venezuela had eight consecutive year of recession before the recent five quarters of positive growth.
Update : The parallel market rate for the month of July came in at an increase (devaluation) of 12% from June.
Then we have Simple Flying telling us that LATAM Peru (Peruvian airline) will begin daily operations between Lima (Peru) and Caracas (Venezuela), connecting the two capital cities and enabling both passenger and cargo flow. LATAM will be competing with Conviasa (Venezuela government-owned airline) although Conviasa only services this route twice a month.
It’s another example of everybody and their brother looking to “normalize relations” with Venezuela and the Maduro regime, however, this is a business move, not political. If it doesn’t prove to be profitable LATAM will simply pull the plug as we’ve seen from other airlines trying to service Caracas in the past.
Then we have another piece from Rio Times reporting that the first four months of 2023 marked a significant 102% increase in Venezuela exports to Colombia, according to the Venezuelan-Colombian Economic Integration Chamber. The overall bilateral trade also increased by 44%. The growth in trade can be attributed to the reopening of the border between the two countries….duh!
Now, let’s get started with this week’s Venezuela : Down The Rabbit Hole segment…
Chapter 4/ Just The Basics…
Once you get past ensuring the safety and security of the population as well as availability of food (to be discussed later), there is nothing more basic the government must provide than water and, in the modern world, electric power. You know, the things we take for granted. Turn on the tap and water comes out. Flip the switch and the lights come on. You would assume that a country with an abundance or natural resources, especially one more or less swimming in oil, would have no trouble providing these essentials. Of course, you would be wrong. Let’s start with power generation and distribution.
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