Forex Fantasyland: Venezuela's 'Official' Rate

♠ Posted by Emmanuel in ,, at 10/06/2014 01:30:00 AM
Would you like some truth with that?
Latin America's current state-of-the-art in economic mismanagement is exemplified by Venezuela, but that's not really saying much for it's arguably been the regional leader for several years now. Galloping inflation, shortages of basic commodities, runaway crime rates...everything bad is happening there, and any half-wit can see through their leaders' deception that "it's all the fault of the West." Life is what you make it, and I'm afraid the econo-comedians who actually buy into all that socialist stupidity get what they deserve.

A few months ago, I discussed the four-tiered exchange rate system in Venezuela, beginning with that from forex fantasyand, the "official" rate, to that which actually prevails in the streets of Caracas which is many times higher. If it's hard to imagine this abstraction, the good folks at Reuters have now produced a photo essay illustrating how ludicrously expensive different items would be if we believed the "official" exchange rate and nasty things like galloping inflation did not exist. With a nod to the Economist's Big Mac Index, I took the example of the burger whose price has risen much in recent weeks:
Venezuela's economic crisis has led to some shocking and surreal price distortions that hit people's buying power dramatically.

While the government of President Nicolas Maduro calls the country's minimum wage of Bs. 4,252 the highest in the region when converted to $675 using the official exchange rate [Bs. 6.3 to 1 USD], the galloping black market for currency considers it as just $42.50 when converted at the street rate of Bs. 100 per US dollar, the rate which many importers and retail outlets must use to acquire hard currency.

Venezuela's annual inflation rate of more than 63 percent is the highest in the Americas, according to official statistics. 
Now you understand what misery truly is--although I expect it to things to get even worse there.