VZCZCXRO5841
PP RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHMT
RUEHNG RUEHNL RUEHQU RUEHRD RUEHRG RUEHRS RUEHTM RUEHVC
DE RUEHCV #0351 0791900
ZNR UUUUU ZZH
P 201900Z MAR 09
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC PRIORITY 2765
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RHEHNSC/NSC WASHDC
RUMIAAA/HQ USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE
RUEATRS/DEPT OF TREASURY

UNCLAS CARACAS 000351 
 
SENSITIVE 
SIPDIS 
 
HQ SOUTHCOM ALSO FOR POLAD 
TREASURY FOR RJARPE 
NSC FOR RKING 
COMMERCE FOR 4431/MAC/WH/JLAO 
 
E.O. 12958: N/A 
TAGS: ECON EFIN VE
SUBJECT: PARALLEL RATE CONTINUES TO RISE 
 
REF: A. 2008 CARACAS 376 
     ¶B. CARACAS 137 
     ¶C. CARACAS 304 
 
¶1.  (U) The parallel foreign exchange rate has jumped from 
5.95 Bs/USD to 6.3 Bs/USD (as measured by the cost of buying 
a dollar) since the beginning of the week, representing a six 
percent devaluation of the bolivar on the parallel market in 
three days.  One press report, quoting one currency trader, 
tied this movement to speculation the government was going to 
devalue its fixed official exchange rate.  (Note:  The 
parallel market is small (though likely growing in size), 
highly volatile, and lacking in transparency.  The Government 
of the Bolivarian Republic of Venezuela (GBRV) is a major 
supplier of dollars to the parallel market (refs A and B), 
and one of the sources of volatility in the market is the 
lack of a consistent intervention strategy by the GBRV.  End 
note) 
 
¶2.  (U) As noted in ref B, we and most local analysts believe 
that the parallel rate will rise over the course of 2009, 
though not necessarily in a linear or smooth fashion.  With 
GBRV oil revenues almost certain to be significantly lower in 
2009 than in 2008, the GBRV will have less hard currency with 
which to intervene in the parallel market and/or allocate for 
imports and other purposes at the official rate.  In other 
words, we expect supply of dollars to the parallel market to 
go down and demand for dollars to go up.  The recent jump in 
the parallel rate probably reflects these larger trends as 
much as it does rumors of a devaluation.  It may also reflect 
that the GBRV, for whatever reason, has not sold dollars into 
the market in recent days. 
 
¶3.  (SBU) Comment:  In ref C, post offered its assessment 
that the GBRV was unlikely to devalue in the near future, as 
it has other options for financing its 2009 deficit and does 
not care about the distortions related to an overvalued 
official exchange rate.  If there is a devaluation, it will 
indicate that President Chavez is convinced oil prices will 
remain low (relative to recent years) into 2010 and that he 
has found what he believes to be a politically acceptable way 
to sell the devaluation to the Venezuelan public.  We would 
also note that an official devaluation need not have a 
significant impact on the parallel market, as the quantity of 
dollars sold at the new official rate would not change 
greatly (i.e., the demand for dollars on the parallel market 
would continue to be strong).  Of course, the announcement of 
a devaluation would have a psychological impact that could 
easily cause a temporary spike in the parallel market.  End 
comment. 
CAULFIELD