Not so strong

2 January 2008 By Martin Hutchinson

Hugo Chavez’s currency redenomination is Venezuela’s first since 1879. The next is unlikely to take so long. With inflation at 22.5% and the black market exchange rate three times the official rate, Venezuela is sliding towards traditional Latin American hyperinflation.

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On January 1, Venezuela introduced the "strong bolivar" (currency symbol: VEF) dividing previous bolivar figures by 1,000. The official exchange rate before the change, set in 2005, was Bs. 2,150 to the dollar; the unofficial "parallel" exchange rate was around Bs. 5,700 to the dollar.

The country's balance of payments surplus in the third quarter of 2007 was $3.9bn, compared with $7.5bn in the third quarter of 2006.

Venezuelan consumer prices rose 3.3% in December 2007, to give a year on year inflation rate of 22.5%, up from 17% a year earlier.

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