The Maduro administration is to abandon the three-tier foreign exchange structure that critics say is holding back Venezuela’s economic growth.
The landmark decision to abandon the Chávez model comes at a time when country is spiralling further into recession, with shortages for basic groceries leading to ever longer waiting lines.
For the past 12 years, the government has sold dollars for critical imports at two rates, 6.3 and 12 bolivars, while instructing retailers to artificially suppress prices to reflect the subsidies. The third tier involves selling currency at 52 bolivars to the dollar.
This complex system will now be scrapped in favour of a free-floating exchange rate that is dictated by supply and demand, although there will still be a subsidised rate in place for key imports.
Economists have described the move as, effectively, a much-needed currency devaluation that will help to boosts the country’s stalling economy.
However, many challenge comments made by the country’s finance minister Rodolfo Marco Torres that the new system will be “totally free,” pointing out that it officials are likely to maintain a tight grip on regulating the currency.
