Re: Hugo in trouble
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Message: Hugo in trouble
In a recent report, Morgan Stanley said it expects inflation in the country to reach 30% this year, up from 22.5% in 2007. The investment bank's expectations are in line with many other forecasters. "It doesn't make sense to save bolivars," said the unidentified young woman
Without access to dollars, the majority of the population is stuck paying artificially high prices for consumer goods and is left defenseless against an annual inflation rate that nearly touched 30% in March.
"This whole system is raising costs," said Robert Bottome, editor-in-chief of Veneconomia, a financial newsletter.
Companies are also bound by currency restrictions, wreaking havoc on an oil-export economy in which almost everything else is imported with dollars.
"We live in an import-driven economy, and there's no way to avoid the dollar problem," said Juan Andres Baumeister, an economist who runs a blog site that tracks the black market in dollars.
Importing goods involves a cumbersome process in which purchases must first be vetted by Cadivi, which then disburses the dollars companies need to pay for their orders.
Since suffering an unexpected setback at the ballot box last December, Chavez's government has changed its tack and acknowledged that rising costs and shortages of basic goods are damaging the government's popularity.
"The good news is that a concerted effort on the monetary and fiscal fronts has yielded some positive results," said Boris Segura in a Morgan Stanley note in May. "But the bad news is that we doubt that the bout of macroeconomic adjustment is set to last."
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