Writing in the Financial Times, Moises Naim analyzes Venezuela’s most recent devaluation. He points out that since Chavez assumed leadership the country’s currency has been devalued 8 times. As a result the bolivar has lost about 992% of its former value. Mr. Naim states that “the measure will fall short of correcting the country’s profound macroeconomic imbalances…the currency is woefully misaligned.” Prices of consumer goods are exorbitant and their purchase is beyond the reach of the average Venezuelan. Staple goods are in short supply and can only be obtained after waiting in long lines. The devaluation has again pushed prices higher fueling inflationary forces. In order to provide some degree of economic stability, the government attempts to control the markets so that citizens are not crushed by the country’s problems. Mr. Naim an internationally renowned columnist and commentator on globalization politics and economics further states:

“The imperative to devalue was driven by a combination of bad policies and ideological necrophilia: love for ideas that should be long dead, and have been tried before with disastrous consequences”

The bolivar is now set at 6.3 to the dollar instead of 4.3. Venezuelan officials say that the devaluation will help the government balance its books. The sale of oil on the open market will give the country more bolivars for each dollar. It is possible that there might be some improvement in the country’s economy, though I doubt it.

The average Venezuelan must now survive with higher inflation, less access to quality imported consumer goods, greater shortages of food staples and a general deterioration of their stations in life. In an Investors.com editorial it was suggested that “with Venezuela’s impoverished population already spending 80% of their income on food, the frenzy in the shops is nothing but a race against starvation in a nation whose destructive Cuban-directed socialist agrarian policies ensure that the country can no longer grow food and must rely on imports.”

I have friends and business contacts in Venezuela. We have known each other since before Chavez came to power. I have traveled to Venezuela and spent time with them. In turn they have come to the United States to visit with me and my family and to pursue their goals. By anyone’s standard these Venezuelans would be considered successful entrepreneurs and professionals. They all complain that their standard of living has progressively worsened each year under Chavez. Their businesses can no longer economically sustain them. They are forced to depend on governmental aid for many basic needs. I listen to them tell me how consumer goods that we in the U.S. take for granted is not available there or very expensive to acquire.The devaluation has pushed their livelihoods closer to the brink of collapse.

According to them the harsh economic times, brought on in great part by the government’s policies, has fueled street crime and official corruption. While visiting NYC they were impressed by the noticeable police presence in the streets. In Venezuela the police are conspicuously missing from the streets. The Venezuelan police have stopped patrolling certain sectors of Caracas. My friends’ complain that criminals leave these communities to commit crimes in other parts of the city. After robbing and assaulting law abiding citizens these criminals melt back into the safety of their community, knowing the police will not search for them there.

Presidential candidate Maduro constantly expounds the Chavez theme that capitalist speculators are responsible for the black currency market and the country’s monetary problems. He does not discuss the fact that the government might be the biggest currency speculator. The country recently held a foreign currency auction only for local importers. Even Venezuela’s leading analysts say this was a de facto devaluation. SICAD, the government’s currency program, auctioned about 200 million USD worth of currency. As expected, the government did not release the names of the companies that participated, the results of the auction nor the selling price of the dollar. Jose Guerra, a well respected economist, believes that the dollar was purchased for about 12 bolivars. This price is considerable higher the government’s fixed rate. I cannot think of any reason why an importer would pay such a high price for the dollar, except out of desperation and arm twisting on the part of the government. The companies will pass the higher cost on the buyers if the “Chavez” government does not enact new currency controls to prevent the pass along. This auction and future devaluations will fuel inflationary pressures. I do not see how these governmental auctions can help the Venezuelan poor or the much heralded socialist revolution.