Venezuela devalued its currency for the fifth time in nine years as ailing President Hugo Chavez seeks to narrow a widening fiscal gap and reduce a shortage of dollars in the economy.
The government will weaken the exchange rate by 32 percent to 6.3 bolivars per dollar starting Feb. 13, Finance Minister Jorge Giordani told reporters today in Caracas. Companies with operations in Venezuela, including Colgate-Palmolive Co., Avon Products Inc. and MercadoLibre Inc., fell on the announcement.
A spending spree that almost tripled the fiscal deficit last year helped Chavez, 58, win a third six-year term. The devaluation can help narrow the budget deficit by increasing the amount of bolivars the government receives from oil exports. Chavez ordered the move from Cuba, where he is recovering from a fourth cancer surgery, Giordani said.
“Any tackling of the massive economic distortions, even if far more is required, is positively viewed by markets,” Kathryn Rooney Vera, a strategist at Bulltick Capital Markets, said in an interview from Miami. “We expected more, and more is indeed needed to correct fiscal imbalances and adjust economic distortions, but this is something and there may be more to come.”