Identifier
Created
Classification
Origin
09CARACAS351
2009-03-20 19:00:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Caracas
how-toVZCZCXRO5841 PP RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHMT RUEHNG RUEHNL RUEHQU RUEHRD RUEHRG RUEHRS RUEHTM RUEHVC DE RUEHCV #0351 0791900 ZNR UUUUU ZZH P 201900Z MAR 09 FM AMEMBASSY CARACAS TO RUEHC/SECSTATE WASHDC PRIORITY 2765 INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS RHEHNSC/NSC WASHDC RUMIAAA/HQ USSOUTHCOM MIAMI FL RUCPDOC/DEPT OF COMMERCE RUEATRS/DEPT OF TREASURY
UNCLAS CARACAS 000351
SENSITIVE
SIPDIS
HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR RJARPE
NSC FOR RKING
COMMERCE FOR 4431/MAC/WH/JLAO
E.O. 12958: N/A
TAGS: ECON EFIN VE
SUBJECT: PARALLEL RATE CONTINUES TO RISE
REF: A. 2008 CARACAS 376
B. CARACAS 137
C. CARACAS 304
UNCLAS CARACAS 000351
SENSITIVE
SIPDIS
HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR RJARPE
NSC FOR RKING
COMMERCE FOR 4431/MAC/WH/JLAO
E.O. 12958: N/A
TAGS: ECON EFIN VE
SUBJECT: PARALLEL RATE CONTINUES TO RISE
REF: A. 2008 CARACAS 376
B. CARACAS 137
C. CARACAS 304
1. (U) The parallel foreign exchange rate has jumped from
5.95 Bs/USD to 6.3 Bs/USD (as measured by the cost of buying
a dollar) since the beginning of the week, representing a six
percent devaluation of the bolivar on the parallel market in
three days. One press report, quoting one currency trader,
tied this movement to speculation the government was going to
devalue its fixed official exchange rate. (Note: The
parallel market is small (though likely growing in size),
highly volatile, and lacking in transparency. The Government
of the Bolivarian Republic of Venezuela (GBRV) is a major
supplier of dollars to the parallel market (refs A and B),
and one of the sources of volatility in the market is the
lack of a consistent intervention strategy by the GBRV. End
note)
2. (U) As noted in ref B, we and most local analysts believe
that the parallel rate will rise over the course of 2009,
though not necessarily in a linear or smooth fashion. With
GBRV oil revenues almost certain to be significantly lower in
2009 than in 2008, the GBRV will have less hard currency with
which to intervene in the parallel market and/or allocate for
imports and other purposes at the official rate. In other
words, we expect supply of dollars to the parallel market to
go down and demand for dollars to go up. The recent jump in
the parallel rate probably reflects these larger trends as
much as it does rumors of a devaluation. It may also reflect
that the GBRV, for whatever reason, has not sold dollars into
the market in recent days.
3. (SBU) Comment: In ref C, post offered its assessment
that the GBRV was unlikely to devalue in the near future, as
it has other options for financing its 2009 deficit and does
not care about the distortions related to an overvalued
official exchange rate. If there is a devaluation, it will
indicate that President Chavez is convinced oil prices will
remain low (relative to recent years) into 2010 and that he
has found what he believes to be a politically acceptable way
to sell the devaluation to the Venezuelan public. We would
also note that an official devaluation need not have a
significant impact on the parallel market, as the quantity of
dollars sold at the new official rate would not change
greatly (i.e., the demand for dollars on the parallel market
would continue to be strong). Of course, the announcement of
a devaluation would have a psychological impact that could
easily cause a temporary spike in the parallel market. End
comment.
CAULFIELD
SENSITIVE
SIPDIS
HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR RJARPE
NSC FOR RKING
COMMERCE FOR 4431/MAC/WH/JLAO
E.O. 12958: N/A
TAGS: ECON EFIN VE
SUBJECT: PARALLEL RATE CONTINUES TO RISE
REF: A. 2008 CARACAS 376
B. CARACAS 137
C. CARACAS 304
1. (U) The parallel foreign exchange rate has jumped from
5.95 Bs/USD to 6.3 Bs/USD (as measured by the cost of buying
a dollar) since the beginning of the week, representing a six
percent devaluation of the bolivar on the parallel market in
three days. One press report, quoting one currency trader,
tied this movement to speculation the government was going to
devalue its fixed official exchange rate. (Note: The
parallel market is small (though likely growing in size),
highly volatile, and lacking in transparency. The Government
of the Bolivarian Republic of Venezuela (GBRV) is a major
supplier of dollars to the parallel market (refs A and B),
and one of the sources of volatility in the market is the
lack of a consistent intervention strategy by the GBRV. End
note)
2. (U) As noted in ref B, we and most local analysts believe
that the parallel rate will rise over the course of 2009,
though not necessarily in a linear or smooth fashion. With
GBRV oil revenues almost certain to be significantly lower in
2009 than in 2008, the GBRV will have less hard currency with
which to intervene in the parallel market and/or allocate for
imports and other purposes at the official rate. In other
words, we expect supply of dollars to the parallel market to
go down and demand for dollars to go up. The recent jump in
the parallel rate probably reflects these larger trends as
much as it does rumors of a devaluation. It may also reflect
that the GBRV, for whatever reason, has not sold dollars into
the market in recent days.
3. (SBU) Comment: In ref C, post offered its assessment
that the GBRV was unlikely to devalue in the near future, as
it has other options for financing its 2009 deficit and does
not care about the distortions related to an overvalued
official exchange rate. If there is a devaluation, it will
indicate that President Chavez is convinced oil prices will
remain low (relative to recent years) into 2010 and that he
has found what he believes to be a politically acceptable way
to sell the devaluation to the Venezuelan public. We would
also note that an official devaluation need not have a
significant impact on the parallel market, as the quantity of
dollars sold at the new official rate would not change
greatly (i.e., the demand for dollars on the parallel market
would continue to be strong). Of course, the announcement of
a devaluation would have a psychological impact that could
easily cause a temporary spike in the parallel market. End
comment.
CAULFIELD