Venezuela: Parallel dollar sinks to new record low
June 11, 2015
The bolivar traded in the parallel market continued its downward trajectory in recent weeks and hit a new record low on 28 May. The non-official exchange rate traded at 423.9 VEF per USD, which represented a substantial 55.1% depreciation over the same day of the previous month. In addition, the parallel dollar was more than 65 times the government’s official exchange rate of 6.3 VEF per USD, which is used for preferential goods. The drastic decline in value came just two days after recent data showed that the country’s international reserves fell to an 11-year low of USD 17.4 billion. Moreover, the country is suffering from severe dollar shortages and increasing pressure on government finances due to the sharp drop in oil prices. Oil revenues represent around 95% of Venezuela’s dollar income. Recession, runaway inflation and the sharp fall in oil prices have combined to push Venezuela into an economic crisis. Following the parallel dollar’s sharp depreciation, the bolivar traded in the parallel market gained some lost ground the following day, but still remains at a historically low level in value.
Meanwhile, relatively little fluctuation has occurred in the Simadi exchange rate, the third tier of Venezuela’s exchange rate system. On 28 May, the exchange rate from the Simadi system traded at 199.9 VEF per USD, which represented just a 1.2% depreciation over the same day of the previous month. The Simadi system was introduced in February in an attempt to ease black market activity, however, the parallel dollar has plummeted in value since the Simadi introduction. In addition, data from the Central Bank continues to show that an auction has yet to be held this year to buy dollars under the revamped Sicad system.