Venezuela: Parallel dollar in freefall; Sicad II weakens to record low
January 19, 2015
The bolivar traded in the parallel market continued to tumble in recent weeks due to the ongoing shortage of U.S. dollars, a tough economic situation and strong purchases of the greenback by Venezuelans in an attempt to protect themselves from soaring inflation.
On 13 January, the non-official exchange rate was 173.8 VEF per USD. The Venezuelan currency was 4.7% weaker than on the same day of the previous month and this marked yet another all-time low. On an annual basis, the bolivar traded in the black market lost 178.4% of its value. LatinFocus Consensus Forecast panelists project a non-official exchange rate of 273.0 VEF per USD by the end of this year. In 2016, the panel sees the non-official exchange rate depreciating even further to 367.5 VEF per USD.
In yet another sign that the country is facing a severe credit crunch, the Sicad II exchange rate weakened to 52.1 VEF per USD on 15 January, which marked its lowest value since the new ancillary system was introduced in March 2014. LatinFocus Consensus Forecast panelists expect the Sicad II exchange rate to depreciate slightly, weakening to 61.0 VEF per USD by year-end. Next year, the panel sees the bolivar in the Sicad II system depreciating further to 72.5 VEF per USD. Moreover, data from the Central Bank showed that the latest auction to buy dollars under the Sicad I system was held on 15 October.
As expected, the official exchange rate remained unaltered at 6.30 VEF per USD. That said, LatinFocus Consensus Forecast panelists expect that the official exchange rate will end 2015 at 18.03 VEF per USD. Next year, the panel expects the bolivar to weaken to 36.17 VEF per USD.
In a press conference held on 30 December, President Nicolás Maduro announced that the current exchange rate system would be overhauled sometime this year. While Maduro did not provide specific details about the timing of the reform, analysts believe that he could make an announcement as early as in January.