By Antonio María Delgado

The Venezuelan bolívar surpassed the threshold of 300 local currency units per dollar on the parallel market on Wednesday, boosted by a persistent shortage of foreign currency in the South American country and an announcement of President Nicolás Maduro that he will soon unveil new measures to face the serious economic crisis.

The bolívar, which traded at Bs.275 per dollar a week ago, reached Bs.300.72 on the black market on Wednesday, according to data provided by dolartoday.com, a Venezuelan financial site that continuously monitors the behavior of the national currency.

By the end of February the currency was still trading below Bs.200 per dollar, but had maintained its downward trend over the last few weeks, driven by the Venezuelan government’s refusal to release the dollars required by the domestic market.

Yet the downward trend of the bolívar received an additional boost this week, said Russell M. Dallen, editor-in-chief of the Latin American Herald Tribune news site.

"What triggered all this this week was the fact that Maduro said he was going to launch new measures in his offensive against an ‘economic war’ going on in the country," Dallen, an expert in the development of the Venezuelan economy, pointed out.

"Every time he brings up the subject, every time he says they are going to do something about it, the situation gets worse. And that’s what we just saw today when the bolívar surpassed the threshold of 300 local currency units per dollar," he said.

Maduro, who attributes the serious shortages crisis in the country to economic sabotage operations undertaken by entrepreneurs from the private sector, said in a speech filled with rhetorical figures on Tuesday night that he will be taking new steps soon enough.

"We must start a series of actions in order to defeat the strategy of the economic war, which must be through a civic-military union and the war from all the people of Venezuela," he said in his weekly TV show, Contacto con Maduro , broadcast by state-run TV station Venezolana de Televisión (VTV).

"All the people must know what to do to defend our sovereignty, and the civic-military union, along with the working class, will help deal with sabotage, speculation, and the blatant theft against Venezuela," he added.
His statement was not welcomed by local entrepreneurs because, on the one hand, it hinted at the possibility of further expropriations of companies and even prison time for their employees and, on the other, it doesn’t give any indication that the regime intends to do something about the root causes of the crisis: the lack of dollars to continue sustaining the petro-populist model imposed by chavismo, whose impact is being intensified by a restrictive exchange control.

To Alejandro Grisanti, chief economist for Barclays Capital in the Latin American region, the inability of the regime to provide solutions for the serious crisis is setting the stage for an economic ordeal.

"Until now I don’t see that the Government has any intention to change its mind, which leads us to believe that this trend [a steady erosion in the value of the bolívar] is going to continue and that is most likely that Venezuela will have a very severe hyperinflation with a drop in the purchasing power of Venezuelans," he warned.

The problem is that the regime, through the exchange control, is handling the allocation of dollars at its own full discretion, delivering foreign currency only to a privileged sector at an exchange rate of Bs.6.30 per dollar, while the vast majority of the population has to resort to the black market and pay Bs.300 for every single dollar they need.

The regime, which has direct control over 96% of the dollars coming into the country and does as it pleases with them, barely places one percent in another market known as Marginal Currency System (or Simadi), whose rate hovered around Bs.200 per dollar this week.

Sicad I and II, two alternative mechanisms that sell foreign currency to Venezuela’s corporate sector, haven’t carried out auctions for quite some time now.

According to the Government, the amount of foreign currency placed through Simadi is close to $75 million a week.

But that amount is insufficient, Dallen warned, because that domestic demand has been estimated at nearly $100 million a day.

"Those $75 million a week are less than what is required for a single day," he said.

And what Dallen deems even more alarming for the future development of the Venezuelan economy is that central bank reserves have also been experiencing a steep decline.

"They are going to fall below $18 billion this week; at this time are $18.062 billion, but $539.5 million in bonds with maturities have to be paid over the next four days," said the economic expert.

Dallen also stressed that the decline in reserves has been happening very quickly.

"Reserves stood at $24 billion in March of this year, so that means they have dropped around $6 billion," he said.