Venezuelan gov't prepares to take economic steps
The Cabinet cherishes devaluation of the local currency
"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.
President Nicolás Maduro is not only the heir to the throne, but also to an economic crisis which demanded urgent measures to rectify the course. The crisis showed up in two aspects: a 50% inflation estimate, and shortage of staples ranging between 70% and 98%. These issues might hit the President's poor popularity; considering his feeble electoral victory of 1% over his challenger.