Take physic, pomp

Venezuela’s budget, currency devaluation and a chance for the prophets of doom to win money and kudos

Feeling lucky, punk? (redux)

This week Venezuela’s Congress passed the 2009 budget, coming in a touch under U$78Bn and with an air of austerity (here’s Reuters in Spanish). It’s typical for Vzla budgets to be thrown in lowball then any extra gravy from better oil sales is used on discretionary projects, so the benchmark oil price of $60/bbl for 2009 (50% higher than today’s price) means that unless oil climbs the country will have to nip and tuck at some point.

As usual there are plenty of expert analysts (the same people who would have cost you your life savings if you followed their advice over the last two years) calling for the country to devalue its currency, the Bolivar Fuerte (VEF); the same chorus has been calling this tune every year since…well, since Venezuela’s economy started expanding rapidly (and that really disappointed them), but it looks like a devaluation might actually happen this time. If the country goes into recession it makes sense to deval while there is less inflationary pressure. On the other hand, if oil picks up it’ll be business as usual and the VEF stays at 2.15 to the dollar. So the bottom line is that there is unlikely to be a deval in the first quarter of 2009 at the very least. Then after that point it depends on the state of the oil market, not on much else (certainly not politics).

The last round of BS about an imminent devaluation of the VEF was back on October 23rd. At that time I offered to bet $100 that there would be no deval in what was left of 2008. Unfortunately, the shills talk the talk but can’t walk the walk and I failed to get anyone to wager with me.

But here comes the second chance, sportsfans! I again offer to bet U$100 that on 31st March 2009 the VEF has not been devalued and is still at the official peg of 2.15. The bet is offered at even money (your c-note covers my c-note) and we settle on April 1st 2009 via PayPal (or whatever you prefer)…..we can even arrange for the money to cover a meal at Fallen Angel (or at least the round of cocktails). Any takers?

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