Venezuela president raises fuel price by 6,000% and devalues bolivar to tackle crisis
Nicolas Maduro, the President of Venezuela, announced to the public that for the first time in 20 years the price of gasoline will increase approximately 6,000% to about 6 bolivars per gallon. He says this is a necessary action in order to fund social programs and in order to increase the minimum wage. Even with these increases, their price of oil is still considerably low compared to the global standard. However, according to analyst Luis Leon, these price increases aren't drastic enough and because of the hyperinflation within the country of Venezuela, the rise in oil price will make little to no differences.
I found this article interesting because it relates to the topic of inflation we just finished discussing in class. The fact that they can increase their prices of oil that much, but make little to no difference in the actual situation of the country goes to show how imperative it is that inflation is managed and kept to a steady state. It was also interesting because it reminded me of the formula to compute government expenditure in our country(Tax-Expenditure), but this is different in socialist countries because the added profits from the risen gasoline prices more directly add to their government's budget than it would here in the U.S.
URL: http://www.theguardian.com/world/2016/feb/18/venezuela-president-raises-fuel-price-by-1300-and-devalues-bolivar-to-tackle-crisis
URL: http://www.theguardian.com/world/2016/feb/18/venezuela-president-raises-fuel-price-by-1300-and-devalues-bolivar-to-tackle-crisis
This is definitely an interesting article, good pick!
ReplyDeleteIn the article, Maduro said that he hopes people on the streets will understand the measures.
This article has helped me make sense of our class lectures on exchange rates. Raising prices (inflation) will lower the exchange rate.
It will be interesting to see how the people of Venezuela react to this hike in fuel prices and wether or not the country will see another wave of violence like in 1989. It also seems that many economic analysts believe that Maduro should have made more drastic changes in order to avoid further economic meltdown.
ReplyDeleteThe article was very interesting. It was very cool how it explained how the effects of the increase in the price level of gas will ultimately effect the exchange rate. I honestly do not see the Venezuelan people reacting well to the increase in price. While they have had hyperinflation, the article states that the price of oil would rise up to 6,086%, which is a major increase.
ReplyDeleteVenezuela has been experiencing over 50% inflation for a few years in a row now and is predicted to have over 150% inflation in 2016. Gas prices have risen slightly over the past few weeks which I am sure is only minor aid to the Venezuelan economy.
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