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Not Worth a Penny: Venezuelan Bolívar Crumbles to Record Low

By: Peter Sacco - @petersacco2 - Sep 29, 2014, 4:48 pm
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The 100-bolívar bill will no longer buy even a single US dollar at the black-market exchange rate. (ParaleloDolar)

EspañolThe black-market currency exchange for Venezuelan bolívares passed a milestone on Friday, and not in a good way. The troubled currency has fallen in value to such a degree that one now needs more than 100 for each US dollar, as documented by DolarToday.com.

The bolívar rate of 100.7 per US dollar on the black market — worth less than a single penny — highlights rampant inflation, given that one year ago it was 40 Bs. That comes after the Chavista regime eliminated three zeros from the currency in 2008 and called it the bolívar fuerte (strong), a label that did not stick for very long. It also places great pressure on President Nicolás Maduro, since the prime official rate of 6.3 Bs. overstates the underlying market value, as expressed on the street, by a factor of 16.

While DolarToday is the most prominent and commonly used reference for informal exchanges, there are others. One such website is Aguacate Verde, and it places the bolívar rate not far behind at 94.5, as does Lechuga Verde.

The persistent decline of the bolívar reflects the eagerness of Venezuelans to get their hands on US dollars, rather than forfeit their purchasing power amid 142 percent inflation, as calculated by Steve Hanke of the Cato Institute. This month, the nation’s central bank even confessed to 63.4 percent inflation over the past year, in spite of many repressive price-control and rationing policies.

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The bolívares required to purchase US dollars took a dip after the wave of protests died down and the regime introduced the SICAD II window, but then continued to climb. (PanAm Post. Data: DolarToday)

“To paint a picture, the highest denomination of Venezuelan currency is the 100 Bs.,” says Cassandra Izaguirre, cofounder of SOS Worldwide and director of operations with SOS Venezuela. “Today that bill is worth less than one US dollar. That goes to show the magnitude of the economic crisis that Venezuela faces.”

Under the direction of Maduro, the availability of US dollars has declined steadily throughout the country. In fact, the central currency board, known as Cencoex, has introduced nearly 30 percent less US currency into the domestic economy this year than it did from January to August in 2012. As international currency reserves at Venezuela’s central bank have fallen, by 29 percent since the start of 2013, regulations on access for Venezuelan citizens have risen.

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SOS Venezuela has grown in a viral manner since opposition protests proliferated earlier this year. (SOS Venezuela)

“[Black market inflation] translates to higher scarcity, higher all-around inflation, and a lower overall quality of life for Venezuelans,” says Izaguirre. “While the government does not like to admit it, Venezuela is completely dependent on imports. [Since] the parallel dollar is used as a price indicator for many goods, merchants will raise prices, and the Venezuelan citizen’s purchasing power will decrease more than it already has.”

Venezuela currently utilizes three different official exchange rates for the dollar. Importers of basic necessities such as food and medicine receive a rate of 6.3 Bs. to the dollar, while a rate of 11 Bs. is applied to imports of less essential consumer goods.

This year, the regime introduced SICAD II, a new way to acquire foreign currency and an attempt to reign in the black-market exchange rate — the only exchange rate in Venezuela that fluctuates in accordance with the free market. However, the SICAD II rate of 50 Bs. has failed to achieve the desired affect.

Venezuela’s complex monetary system has proved a deterrent to domestic production, raising the cost of inputs and contributing to the country’s scarcity of basic consumer products.

Izaguirre says the inflation is a result of economic policies “that have all been ‘quick fixes’ to maintain popularity and appear proactive.” Even if the official rate doesn’t show it, she explains, the informal market reveals that imports have simply become more expensive due to the devalued currency.

In the face of intense criticism, Maduro maintains that the devaluation of the bolívar has been precipitated by an ongoing “economic war.” He points the finger at people in western countries, who he believes want to destabilize the proudly socialist regime.

Peter Sacco Peter Sacco

Peter Sacco is a journalist who works from Quetzaltenango, Guatemala. He has developed a special interest in immigration and the war on drugs since moving to Honduras in August of 2013. Peter holds a bachelors degree in journalism from the University of Massachusetts, Amherst. Follow @petersacco2.

Mexican Police Recover Burned Remains of Kidnapped Congressman

By: Belén Marty - @belenmarty - Sep 29, 2014, 4:25 pm
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EspañolMexican federal prosecutors confirmed on Thursday that one of two burned bodies recovered from a car in the state of Zacatecas is that of Congressman Gabriel Gómez Michel. On Monday, September 22, armed men kidnapped the 49-year-old PRI legislator in broad daylight, along with his assistant Heriberto Núñez Ramos, while the pair were on their way to the Guadalajara airport in the state of Jalisco. Police identified the second body as the congressman's assistant, Núñez Ramos. Although no arrests have been made, prosecutors believe drug traffickers to be responsible for the attack. Highway security cameras show that over the course of a few minutes, a group of six vehicles surrounded the congressman's SUV, forcing Gómez Michel and Núñez Ramos out of the car. The Congressman, elected to office as a Green Party representative but later joined the Institutional Revolutionary Party (PRI), did not travel with bodyguards, unlike most Mexican politicians. https://www.youtube.com/watch?v=pDBm8jSsEns According to an article in El Universal Mexico, his fellow party members said Gómez Michel did not take enough precaution. "Why do you have those [bodyguards]? If you do things right, God will protect you," the congressman was often heard saying. Prosecutors in charge of the case said they are continuing to look for evidence to "establish the facts and bring those responsible for the double murder to justice." The motives for the crime remain unknown. According to Luis Carlos Nájera, a prosecutor from Jalisco, the "terrible coordination between police forces" may have contributed to the congressman's murder. Nájera said Gómez Michel had never reported any threats made against him or any reason to fear for his life. The prosecutor also noted they have been unable to determine whether the congressman was beaten or tortured before his death, given the condition of his remains. The police have discarded the possibility that the congressman was kidnapped for monetary gain, since the murder occurred less than 24 hours after Gómez Michel disappeared, and his family did not receive demands for a ransom. Cartel behind the Murder? According to the Zacatecas prosecutor, the New Generation cartel has the strongest presence among drug trafficking gangs in the state of Jalisco. Police discovered at least 17 bodies buried in southern Guadalajara in February. In March 2013, members of the New Generation cartel shot and killed the Tourism secretary, according to Mexican police. Prosecutors convicted one of the leaders of the cartel, Nemesio Oseguera (El Mencho), for having ordered the assassination. "Every citizen is important, but in terms of the position [of Gómez Michel] and the way he was kidnapped and assassinated, it speaks to the incredibly vulnerable position that certain parts of the country are in," explained Javier Oliva, a public security expert at the National Autonomous University of Mexico (UNAM) to AFP representatives. Since 2006, when the active policy to fight the drug traffickers was established by then President Felipe Calderón, 80,000 people have been victims to drug cartel-related crimes. The last notable murder of a politician occurred when a candidate for governor in Tamaulipas was shot to death in 2011. The Consequences of his Death More than 4,000 people attended Gómez Michel's funeral in Grullo, Jalisco, including the Jalisco Governor Aristóteles Sandoval, local politicians, colleagues in parliament, and the president of the University of Guadalajara, Tonatiuh Bravo. In addition, on Tuesday, Congress held a moment of silence in memory of their murdered colleague. Silvano Aureoles, president of the Chamber of Congress, spoke out in solidarity and respect for Gómez Michel's family, friends and PRI colleagues, and asked prosecutors to solve the case immediately. "We don't want Congressman Gómez Michel's death to be just another statistic among the many dead in our country. The problem of insecurity in Mexico today is serious, and it demands the attention of the Mexican government," said Aureoles. "We cannot grow accustomed to crime and violence sheltered in impunity." The coordinator for the Democratic Revolution Party (PRD), Miguel Alonso Raya, addressed these safety issues said that Gómez Michel's murder has undoubtedly shaken Congress. "We must push forward a comprehensive policy for public security that can really combat crime, with the highest level of consensus between public forces," Raya urged. Translated by Laura Weiss.

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