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Worrisome economic signals in Venezuela

The Central Bank of Venezuela is preparing a new set of economic measures intended to curb inflation


Awash in cash from booming oil prices and thriving consumption, seasoned by low interest rates, the Venezuelan economy is partying good time, but a number of structural gaps and poor expectations suggest that the effervescent period is coming to an end.

Undoubtedly, in Venezuela the middle class is getting heavy financing to purchase vehicles, apartments and home appliances. Meanwhile, unemployment is dropping and Hugo Chávez' administration is expanding expenses by granting scholarships, subsidies, and has increased wages to encourage consumption. However, in parallel, inflation is skyrocketing; the country risk is soaring; the unofficial exchange rate is mounting unstoppably; the public finances show a deficit and imports have climbed to alarmingly high levels.

Yet another recipe
Besieged by growing prices, Gastón Parra Luzardo, President of the Central Bank of Venezuela (BCV), last June 8 announced that -once again- he is designing, together with the government, a new plan allowing Chávez administration to meet this year's annual inflation goal of 12 percent.

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