Venezuela Bolivar Devalues 89% in Start of New FX Market

Tyler Durden's picture

Venezuela's exchange rate is a Gordian Knot of rules and regulations meant to baffle onlookers with bullshit and, we suspect, hide the hyperinflation from prying eyes just a little longer.

Today's launch of SICAD II, a new currency market which allows the free-market to bid for USD (in Bolivars), appears to be an effort to provide liquidity to a black-market for dollars. SICAD II priced at 55 Bolivars today - an 89% devaluation from the official rate of 6.29 (and another auction-based rate SICAD I - applicable to some firms - of 10.8).


This new SICAD II rate will replace SICAD I as the official tourist rate.

Confused? You should be - the bottom line is that Maduro and his cronies continue to suppress the reality of a hyperinflating currency as student marches grow ever more popular and outspoken.


The positive 'spin' is that SICAD II has lowered the black market rate but simply due to the additional liquidity and transparency that the platform provides - an 88% devaluation is nothing to be too excited about!!


Via Reuters,

"It is going to cover 7, 8 percent of real (dollar) demands, seeking equilibrium as regards the flow of foreign currency necessary for the functioning of the economy," Maduro said in a speech on Friday.


Sicad 2 essentially revives a previous system, known locally as the "permuta" or "swap" market, which Chavez shuttered in 2010 after accusing speculators of manipulating it.


Opposition politicians have long criticized the government's currency controls. Still, they are lambasting Maduro for what they call a "stealth devaluation" via the new system.


"Today will be 'black Monday'. Sicad 2 is another devaluation for our currency," Tweeted opposition leader Henrique Capriles. "Nicolas has also finished off the bolivar. Another blow to the poor."


Venezuela's annual inflation rate, currently at more than 56 percent, is the highest in the Americas.

As Bloomberg adds,

“This is a devaluation any way you look at this,” Tamara Herrera, chief economist at financial research firm Sintesis Financiera, said by phone. “The government is trying to bring down the black market rate with this new market, with the consensus that the dollar should be trading for about 50 bolivars.”

This was not an entirely unexpected move and we suspect a large number of players in today's auction were arbitrageurs who positioned in CDS for this platform's boost in liquidity and have profited from the move...

Bear in mind that most of the risk in VENZ CDS is devaluation risk (since its priced in USD) as opposed to credit risk - which for a very weak sovereign such as this is the same issue when it comes down to it...

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topspinslicer's picture

89% ? Could be worse

aVileRat's picture

Even with an 89% devaluation it's still 50% overvalued from the new peg according to the black market ask.

Speaking of black markets:


DoChenRollingBearing's picture

Peru has been growing for 15 years or so ever since it stomped on its nasty Communists (Shining Path).  Each new government has been fairly friendly to outside investors, especially in the mining sector (60% of Peru´s exports by dollar value).  These are my two new pieces on gold and other metals mining in complicated Peru:

"Gold and Other Metals Production in Peru" is first, then "Mines and Metals in Peru":

Oldrepublic's picture

Big inflation during Alan Garcia’s first time as President of Peru which reached 7,649% in 1990.

zaphod's picture

Well at least Venezuela's bankers, who were able to borrow cheap debt to buy up assets, will now be able to pay off their loans on the cheap and thus acquire real assets for free. That's an upside right?

DoChenRollingBearing's picture

There is a temptation for me to wait around until Venezuela goes all the down the drain, and then swoop in to buy some cheap assets (bearing companies?).  An issue, however, is finding one or more honest Venezuelans to take proper care of anything I were to have there.

Would finding any honest Venezuelans there be a problem?

Lux Fiat's picture

Are you referring to the Bolivar or the U$D?

No one has a perfect crystal ball, and the world has a lot of moving parts, but I have great respect for Rickards.

y3maxx's picture

...Wow...Venezuela is the New Incredible Destination value as the next Hooker Heaven.

TerminalDebt's picture

too late, they exported all their hookers to nearby caribbean islands

Kirk2NCC1701's picture

89%?  Fleshwound!  I've had worse.  Now come back here and fight!

Bring out your dead, bring out your dead!

Seize Mars's picture

You would think that people would learn. It's not like there is a lack of data points.
Central planning causes poverty and death.
100% of the time.

bagehot99's picture

But proponents of the free market are way too circumspect about highlighting this fact, which I would do every morning, again in the afternoon, and once again before bed.

alangreedspank's picture

They learn and know, they just don't care. They think they'll fare better supporting central planning because they think they're part of the "team".

youngman's picture

If you were smart..yo would check a tanker in your luggage and bring back a load of their subsidized could make some Icahn says

DoChenRollingBearing's picture

That´s big business I read recently along the Colombia - Venezuelan border.  Buy cheap fuel in Venzuela and sell it for more in Colombia.

"Physical Arbitrage", fishez!

youngman, you should do some "on the spot" reporting and let us all know!  Include pictures!  Hola, chavistas!


Itchy and Scratchy's picture

The FED & ECB salivate & dream about 56% inflation. Every single one of their problems wud be solved!

yogibear's picture

Both the Fed and the ECB have wet dreams about massive inflation. A complete loss in confidence of the currency would cause a out-of-control situation for them. Rates going up and out control would crash their party.

Debugas's picture

the difference is Fed and ECB print money in exchange for obligations to repay

in Venezuela they print it and give away for free

Itchy and Scratchy's picture

Oh yes, I forgot .... the Fed enables the tax payers to borrow from themselves in exchange for obligations to repay themselves with the interest it recieves from themselves!

Murf_DaSurf's picture




Can some one do the math and tell me how this will effect my Final 4 Payout in terms of a dollar conversion?

sessinpo's picture

Murf_DaSurf   Can some one do the math and tell me how this will effect my Final 4 Payout in terms of a dollar conversion?


How much will you pay me in gold bars?

pashley1411's picture

Venezula is just an extreme example of the favorite game of 21st century economics.  

Musical asset chairs, and those stuck with the currency, lose.   

hugovanderbubble's picture

VENEZUELA is in technical Default ------------------Cuba - Nickel-------Brazil.....-SoyBean..... Chaos Coming baby

DoChenRollingBearing's picture

I recently read that even Mighty Toyota is shutting down their assembly plant in Venezuela.

dontgoforit's picture

A gentleman from Venezuela and I had a few minutes discussion about the situation there yesterday after church.  Having been there some years ago I knew a little about the history prior to Chavez.  The man was beside himself saying how the country used to be such a great place to visit and how now it was ruined and most likely was not going to recover.  I told him to keep praying.  It ain't over till it's over.  I can only imagine how heart sick he really is.  And I told him I see America headed in the same direction and how some of us were getting that feeling too - that it may never get 'unruined' again.

DoChenRollingBearing's picture


"I told him to keep praying."

Best advice in the world.

Kirk2NCC1701's picture

I heard that Chevy will be taking over, to build their new Chevy No-Va.  ;-)

DoChenRollingBearing's picture

¡No va!  ¿Comprarias un carro nombrado asi?

LOL, Capitan!

TideFighter's picture

IMO, V's are incredibly corrupt people. They cheat at cheating.

fijisailor's picture

More details on Sicad 2 please.  Where is this exchange (assumed local but not stated clearly) and who is running it?

Escapedgoat's picture

Can I ask a reasonable question here??




Somebody that also has a link with the FACTS plase,  Assumptions will not wash .


Thank you.

sessinpo's picture

Escapedgoat   Can I ask a reasonable question here?? Somebody that also has a link with the FACTS plase,  Assumptions will not wash .

--My reasonable response is: Do your own homework. If there is a link, you can find it. If you want me to do your homework, PAY ME!

Rising Sun's picture

Time for the US to show up with a few crisp $100 bills and buy this shitbag country.

Charles Wilson's picture

Wow!  Time for some Venezuelan  Exports.

Imagine how cheap those Venezuelan Tennis Shoes are gonna be now!

Or some high quality Machine Parts.

Computers?  Anything?


Oh, yeah! I forgot!!!



TalkToLind's picture

Mujeres Venezolanas, escuchar. He enjuague bucal, pasta dental, papel higiénico, agua potable y carne picada. Hit me up, primer llegado, primer servido.


Y'all English speaking bitchez can put that shit into Google translate.

DoChenRollingBearing's picture

You should have addressed your remarks to all of the pretty ones!