Venezuela Lets Bolivar Depreciate 88% on New Sicad II Market

http://www.bloomberg.com/news/2014-03-24/venezuela-to-start-trading-dollars-for-first-time-in-four-years.html




Venezuela allowed the bolivar to weaken 88 percent on a new currency market after loosening controls, a move to increase dollar supplies needed to alleviate a record shortage of imports including medicine, food and toilet paper.

The bolivar was sold for an average 51.86 bolivars per dollar yesterday on the new system, the central bank said on its website. The government’s official exchange rate used to import medicine and food is 6.3 bolivars per dollar and a secondary dollar auction system last sold greenbacks at 10.8 bolivars.

“This is a devaluation any way you look at this,” Tamara Herrera, chief economist at financial research firm Sintesis Financiera, said by phone. “The government is trying to bring down the black market rate with this new market, with the consensus that the dollar should be trading for about 50 bolivars.”
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Eleven years of currency controls have made dollars increasingly scarce, causing shortages of imported products ranging from diabetes drugs to laundry detergent. More than one in four basic goods was out of stock in Latin America’s fourth-largest economy in January, according to the central bank, which stopped publishing up-to-date scarcity data this month.