Caracas Chronicles

Two days before the New Year, Hugo Chávez’s economic svengali let everyone know they will be significantly poorer in 2011.

Starting January 1st – yes, you have two days to prepare – no longer will the government sell some dollars at BsF 2.6 and other dollars at 4.3. The 2.6 rate is disappearing, and transactions that were favored with that rate will now get dollars at BsF 4.3.

Venezuela neophytes may find it difficult to grasp why the government has any business announcing the price of a currency. It’s not like Barack Obama or Angela Merkel go on TV to announce the exchange rate of their respective currencies, right?

The reason is simple: the government, thanks to oil exports, is practically the sole supplier of currency in Venezuela, and for many years now, they decide who gets how much, and at what price.

In raising the price of the dollar, the government is, in essence, raising taxes on the purchase of currency. A devaluation in Venezuela works exactly like a tax increase, in that it takes money from importers and consumers in general in order to fatten the government’s accounts.

But the government, not content with deciding who got what price for which things, had also decided that different people would get different prices. They announced the BsF 2.6 rate in January of this year for basic stuff like food, health, and technology. In April, they announced that certain electrical and agricultural equipment would also have access to the mythical 2.6 exchange rate. Everything else got dollars at either the BsF 4.3 rate, the SITME rate (5.3), or the black market rate (currently 8.76, if you believe these guys).

So now, in keeping with Giordani’s erratic handling of the economy, everything that used to get the 2.6 rate now goes into the 4.3 bracket. I hope this includes the neck braces you will need to treat the whiplash caused by his policies.

This was expected, and its impact will be somewhat muted by the fact that getting government approval for dollars at the 2.6 exchange rate was proving to be more difficult than finding a chavista at CAP’s funeral.

El Universal has the details, including Giordani’s quip that this is done “by placing the human being at the center of economic decisions.”

Well, that human being just got screwed, medieval-style.

That human being is basically seeing his taxes rise on everything that is imported in Venezuela – and by that I mean everything, period.

Prices will have to rise to take into account the new exchange rate, and human beings at the center of this decision will have less money left over to buy other things, which will only delay our emergence from a recession that has caused considerable pain to all human beings.

So yes, human beings were placed at the center of this economic decision … in the same way a turkey is placed at the center of your New Years’ Eve dinner table.