ESPACIO PUBLICITARIO
CARACAS, Tuesday January 22, 2013 | Update
 
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ECONOMY

Venezuelan gov't prepares to take economic steps

The Cabinet cherishes devaluation of the local currency

Devaluation would benefit the Venezuelan government by yielding more bolivars per each US dollar from the oil income (File photo)
VÍCTOR SALMERÓN |  EL UNIVERSAL
Tuesday January 22, 2013  10:44 AM
Pressurized by a significant mismatch in public accounts, shortage of staples, inflation rebound and increasing demand of US dollars, the Venezuelan government is getting ready to take action in the economic field and pondering some scenarios for devaluation.

"Some adjustments have been proposed; I understand the government will make them and gradually announce them as decisions are made. In this new battle against inflation, the feasibility of an adjustment of prices of goods and services will be assessed," Rodrigo Cabezas, ex Minister of Finance and Speaker of the Latin American Parliament, told Unión Radio.

"Our main task is preserving growth; that is crucial in any decision of economic policy to be made and involving tax, exchange, trade, and price control matters," he added.

Cabezas thinks that devaluation should be used as a tool to make the domestic economy more competitive. "The rest would be resorting to the scheme of the past 30 years concerning devaluation to improve tax revenues with an inflationary impact, as usual."

In any case, the economic cabinet weighs devaluation to increase revenues by getting more bolivars per petrodollar and solve in this way part of the existent unbalance between income and expenses in public accounts, amounting to 16% of the Gross Domestic Product (GDP).

Furthermore, overvaluation would dwindle. In the past couple of years, the government has kept a fixed exchange rate. In the meantime, inflation averages 20%. As a result, the US dollar is very cheap and import is more profitable that domestic production.
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