Venezuela devalues the Bolivar

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With political uncertainty underpinning economic stability, Venezuela has moved to shake up its domestic economy with another in a recent succession of devaluations for its currency the Bolivar.

Charismatic President Hugo Chavez remains in Cuba where he is having medical treatment, so it was left to Vice-President Nicolas Maduro to make the announcement after returning from a trip to visit his ailing leader.

The news marks the fifth time that the country’s currency has been devalued since Hugo Chavez’s government took control of the exchange rate in 2003.

Even with strict government monetary controls the capital city, Caracas, is one of the most expensive cities in the world in terms of property prices and day to day cost of living. Many products are also in short supply as Venezuela relies mainly on imported goods.

This most recent devaluation has been expected by analysts and the official exchange rate now stands at 6.3 per cent US dollar, up from 4.3 after the value of the Bolivar was cut by 32% against the US dollar.

With an oil-based economy and oil exports calculated in US dollars, the weaker the bolivar the more domestic cash the government has to spend internally.

There are strict controls in place to prevent currency going out of the country and therefore dollars are difficult to get hold of.

This has led to a situation where US Dollars have recently been trading on the black market at more than four times the official rate.

The effect on the country's inflation rate is hard to predict, but any increase would put further pressure on the domestic economy when it comes to the basic products needed for everyday life.

Stories such as this highlight the complexity and ever changing conditions of the international money markets. When it comes to transferring funds between countries, it is always advisable to use the services of a currency transfer specialist.

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