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[Reelya]

Somehow it wasn't paywalled when I read it, but it is now, so i can't. EDIT: after refreshing the page a few times, somehow the paywall isn't there now ... ?

Here's a Reuters article about the decision:
https://www.reuters.com/article/us-venezuela-economy/venezuela-eliminates-heavily-subsidized-dipro-forex-rate-idUSKBN1FJ040
Venezuela Analysis
https://venezuelanalysis.com/News/13630

And the text of the Financial Times one

Spoiler (click to show/hide)

The Venezuelan bolívar has staged a rare rally against the dollar on the black market after the government announced it would unify its two official currency rates in what appears to be the most significant change to the foreign exchange system in eight years.

The bolívar has gained 11.6 per cent against the dollar since Monday when the announcement was made, according to dolartoday, a US-based company that compiles a widely used black-market rate for the Venezuelan currency. That is the bolívar's biggest three-day gain against the US currency since August.

The bolívar has been in freefall for months as the Venezuelan economy collapses and hyperinflation takes hold. In 2017, it plunged 3,400 per cent, plummeting from 3,100 to the dollar at the start of the year to 111,000 by the end. In the first month of 2018 it lost a further 124 per cent.

But Monday's announcement offered a glimmer of hope. Francisco Rodríguez, chief economist at Torino Capital in New York and an expert on Venezuela, said the reforms marked “a significant departure from previous practice” and appeared “to usher in the most liberalised foreign exchange system in place since 2010”.

Other economists also welcomed the move although they said they wanted to see how the new system worked before judging it.

Venezuela has had exchange controls in place since 2003. In recent years, the state has operated two official rates, the DIPRO rate of 10 bolívars to the dollar and the DICOM rate, set at auction, which stands at 3,345 bolívars. A new auction was due on Thursday. At the same time, on the black market, which most people in Venezuela use, there are 235,782 bolívars to the dollar.

The massive discrepancy between these rates has fuelled arbitrage and corruption. A lucky few with access to the official rates have been able to buy dollars and import goods cheaply and sell them at a handsome profit.

The latest announcement scraps the DIPRO rate. The reforms also include changes to the way the DICOM auctions are held, which could help push the new unified rate towards a more realistic level.
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It comes as the government of Nicolás Maduro grapples with one of biggest economic crises in Latin American history. The economy has shrunk by about a third in the past five years and the IMF expects GDP to contract by 15 per cent this year. The fund predicts an inflation rate of 13,000 per cent this year, compounding price rises of more than 2,400 per cent in 2017.

Faced with US sanctions and struggling to meet its obligations to international bondholders, the Maduro government has conjured up ever more inventive ways to stay afloat, including the launch of an oil-backed cryptocurrency called the petro. On Wednesday it said the first tokens would be sold on February 20.

All this is against a backdrop of imminent presidential elections, likely to be held before the end of April, and talks between the government and opposition in the Dominican Republic, which appear to be inching towards some sort of agreement and are due to resume again next week.

Mr Rodríguez said the exchange rate announcement could be part of a strategy to “generate a perception of stability before the elections”.

“[This week's strengthening of the bolívar] is definitely not sustainable, but could generate a short-term stabilisation of prices that is sure to help the government electorally,” he said.

One thing, is that I'm not sure I'd trust the black market value of dollars in Venezuela is a valid metric of the current inflation rate. Normally, you look at the consumer price index and see if that went up. But nobody is measuring inflation for Venezuela based on price increases, they're all looking at the black market rate for US dollars.

The flaw with that logic is that black market dollars are a fairly finite resource in Venezuela (due to the currency controls), and even with moderate underlying inflation, you could convert into dollars, wait a bit, then cash back out for more than you paid. e.g. it would be treated more like Bitcoin rather than an actual currency. In that situation, you really don't care how much each dollar costs, only that they are going up in price. And those dollars are going to leave circulation faster than they enter it, leading to further scarcity, but that just pushes the price higher and makes them more attractive as an investment/hedging strategy, causing people to hoard them more. Therefore, black market dollars could be an asset bubble in Venezuela. Then, trying to glean much of anything about inflation from the price of the dollars would be akin to trying to estimate the global inflation rate from the Bitcoin price.

[Sheb]

Kinda funny/sad that they seems to be starting to issue their "petro" tokens just as the cryptocurrency market is crashing with bitcoin down to 6000 dollars now.

[Reelya]

Petros are tied to the price of oil, 1 petrol is 1 bbl. But of course, it remains to be seen whether they come good on that. But if they do, then at some future point you can cash in a petro for 1 bbl of oil's price, then the price will rebound even if it sinks in the middle. With bitcoin crashing then Petros might actually sell.

Just googled the petro, and Maduro is trying to get OPEC interested in making a common mechanism for oil-backed crypto-coins.

https://www.rt.com/business/417971-maduro-opec-cryptocurrency-mechanism/

[smjjames]

Wouldn’t linking it to oil be even worse than linking to gold? Given how much more variable it gets. Also, I thought the point of cryptocurrencies was to not have it be backed by any commodity or otherwise be hoarded into banks.

[Reelya]

I've been keeping an eye on the exchange rate in Venezuela via here https://dolartoday.com/ they have an excel spreadsheet you can download of the black market prices.

The main story here is that black market prices (of USD) were skyrocketing daily until 25th January, which is the same day that they opened the legal public currency exchange. After than, the black market price stalled, fell a bit, and has been stable ever since, so at the rate things are going, they're going to have ~zero% change in the black market price for USD for the entire month of February.

The floating price on the public exchanges immediately knocked 75% off the price of USD compared to the black market, taking the price back about 4 months: which is a lot of money in a hyperinflation scenario. This backs up what I was saying about price controls (currency controls in this case) being a primary cause of the inflation that they're intended to combat.

Liberalizing the situation even a little changed the situation completely, so now the black market sellers had a slump in the price of black market USDs on their hands, which then stabilized at a lower price, probably because of the big sellers agreeing to reduce the amount they're selling.

[smjjames]

Maybe not so much 'liberalizing' than 'being sensible'.

[redwallzyl]

Maybe not so much 'liberalizing' than 'being sensible'.

Hopefully so, much to often liberalizing seems to mean neoliberalizing which does the opposite of help.

[smjjames]

Not to mention that the Maduro government is left wing, so, them 'liberalizing' doesn't make sense because it just goes harder core left wing in that direction. Plus, I'm not sure theres any actual ideological bent with price controls, which are just an economic tool, not an economic theory.

[smjjames]

The situation in Venezuela has gotten so bad that the exodus from Venezuela is starting to look like the refugee wave from Syria in 2015. That said, I hope that one forum member (I forget his name offhand) and his family are doing okay and perhaps have gotten out of there. Last I heard (which was at least a month or two ago) he was looking for a way to get out of Venezuela that was at least legal.

It seems long past time for the other countries in South America to stage an intervention (and I don't neccesarily mean militarily). I'm sure the US could help if asked, though South American countries would probably rather we stay out of it.

[martinuzz]

The UN World Food Program's director is ringing the alarm bells about the situation in Venezuela.
"I don't think the world realizes how serious this situation is," he says. "This could grow to become the single largest disaster the western hemisphere has ever seen".

The past few years, millions of Venezuelans have fled their country. Inflation was 6000% last year, and food and medicine have become unaffordable for part of the population.

A recent study by Venezuelan universities has shown that 87% of the population is living in poverty, and people lost 11 kg body weight on average, last year.

The UN refugee council pleads that countries should allow Venezuelans access to official refugee procedures (instead of regarding them as economic migrants).
"Considering the dangerous situation in Venezuala, it is important that they are not deported back to Venezuela,"says Aikaterini Kitidi, spokesperson for the UN.

Meanwhile, neighboring countries that have welcomed the refugees, are now restricting access, because they cannot cope with the influx anymore.
Even Colombia, which has a special relation with Venezuela, because that country accepted millions of Colombian refugees in the 1970s, has made stricter rules.
Venezuelan refugees can no longer easily get a work permit, and Venezuelan refugees now need to be able to show a passport at the border to be allowed in, instead of just an ID card.

Despite stricter rules, every day, tens of thousands of Venezuelans crowd the bridge connecting Venezuela to Colombia, hoping to get out. Many sleep in the street to try again the next day, woman are selling their hairs to be used in the wig industry, and children beg for money, eat from garbage, and sell their body.

According to the Colombian civic registry, 800 thousand Venezuelans entered Colombia last year, and the flood of refugees is not waning.
Hospitals in the border regions are overcrowded and can't accept new patients.

Criminal organisations make good use of the desperate. Women and children end up in prostitution, and men are recruited into criminal gangs.
According to the Colombian human rights organisation Progresar, the vast majority of members of criminal organisations are now Venezuelans.

World Food Program director Beasley calls upon the world to donate money to Colombia, so they can provide food and shelter for the refugees.

[Teneb]

The UN refugee council pleads that countries should allow Venezuelans access to official refugee procedures (instead of regarding them as economic migrants).

Brazil already considers them to be refugees. Hell, there are cities in Roraima (state with the most accessible (by virtue of there being towns at it instead of endless expanses of death-jungles) Venezuelan border) where half the population is Venezuelan. Also entire populations of amerindians are also migrating south while plagued by STDs because they got fucked by pretty much every person in power up north. No such thing as restricting access to our territory as far as I could find.

World Food Program director Beasley calls upon the world to donate money to Colombia, so they can provide food and shelter for the refugees.

Fuck this, though. The refugees won't see a single cent of that money being used for their benefit if countries are stupid enough to hand free cash to Colombia.

[smjjames]

Why don't the other countries in South America stage some kind of intervention? I'd get it if Colombia doesn't due to their past with Venezuela, but still.

[Teneb]

Why don't the other countries in South America stage some kind of intervention? I'd get it if Colombia doesn't due to their past with Venezuela, but still.

Pretty much only Colombia, Brazil and Argentina have the means to do so, and Colombia only barely. As you said yourself, Colombia and Venezuela do not get along; them intervening would likely be even worse. Argentina is too far away. Brasil, meanwhile? Well, we are not only stuck with literally the least popular leader we've ever had (Temer), who is less popular than the military dictators were right after said dictatorship ended, but we're also on the eve of what is likely to be the most cuthroat and heated election we've ever had. I'm actually going to be posting a lot about it as soon as all candidates are 100% confirmed, because right now things can shift and some are still stepping forth.

To be quite cynically honest, I only expect something to happen if oil stops flowing out of Venezuela.

[martinuzz]

but we're also on the eve of what is likely to be the most cuthroat and heated election we've ever had.

Shit, no kidding. Marielle Franco, city councillor of Rio de Janeiro, politician human rights activist, and feminist was shot dead in the streets yesterday.

[smjjames]

Why don't the other countries in South America stage some kind of intervention? I'd get it if Colombia doesn't due to their past with Venezuela, but still.

Pretty much only Colombia, Brazil and Argentina have the means to do so, and Colombia only barely. As you said yourself, Colombia and Venezuela do not get along; them intervening would likely be even worse. Argentina is too far away. Brasil, meanwhile? Well, we are not only stuck with literally the least popular leader we've ever had (Temer), who is less popular than the military dictators were right after said dictatorship ended, but we're also on the eve of what is likely to be the most cuthroat and heated election we've ever had. I'm actually going to be posting a lot about it as soon as all candidates are 100% confirmed, because right now things can shift and some are still stepping forth.

To be quite cynically honest, I only expect something to happen if oil stops flowing out of Venezuela.

And if the US didn't have a history of treating South America as our personal backyard and stomping grounds, we might be able to. Then again, our track record of intervention isn't that bright.