Caracas, Jan. 11 (El Mundo) .- Former Central Bank governor Domingo Maza Zavala estimated that inflation for 2010 could reach between 50 and 60% as a result of Friday's devaluation. To Maza Zavala, the parallel market "will remain of great importance in setting prices if officials maintain the current scheme of limitation and delay in the liquidation of official dollar settlement. "The parallel market will not disappear, because those who fail obtain official dollars will have to resort to barter to get dollars, especially if problems persist with Cadivi transactions," he said. Last year the sector faced delays of 180 days in the delivery of Cadivi dollars, which resulted in many people going to the parallel market. The result, according to Maza Zavala, was that the price of imported wholesale products increased 35.7%.
"If a good part of imports were bought at 2.15 and now will be priced at 4.30, it is inevitable that inflation will double," said Maza Zavala, and for that reason he estimates that prices this year will be between 50 and 60% higher than last year. He based his analysis on two fundamental facts: a fall in purchasing power of between 30 and 40% for Venezuelans - which will reduce consumption - and increased demand for parallel market dollars. "If with a floor of 2.15 bolivars to the dollar the alternate market reached values three times higher, the rise will be much greater with a floor of 4.30 bolivars to the dollar," he said. For products in stock, he believes people are trying to buy everything they can and that means depletion of inventories that will need to be replenished. "The problem is that without knowing what the replacement cost will be, prices will surely rise."
Original report accessible (in Spanish) here.
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