MiniCase_PPTsC06MiniCaseVenezuelanBolivar课件.pptVIP

The Venezuelan Bolivar Black Market How do companies survive when their own government makes it nearly impossible to exchange domestic currency for foreign currency? Rumor has it that during the year and a half that Venezuelan President Hugo Chávez spent in jail for his role in a 1992 coup attempt against the government, he was a voracious reader. Too bad his prison syllabus seems to have been so skimpy on economics and so heavy on Machiavelli. “Money Fun in the Venezuela of Hugo Chávez,” The Economist, February 13, 2004. Santiago’s once-thriving pharmaceutical distribution business in Caracas, Venezuela, has hit hard times Since capital controls were implemented in February of 2003, dollars had been hard to come by He has been forced to pursue various methods – methods that were more expensive and not always legal – to obtain dollars, causing his margins to decrease by 50% The Venezuelan currency, the bolivar (Bs), had been recently repeatedly devalued This had instantly squeezed his margins as his costs have risen directly with the exchange rate Santiago’s immediate problem is that he needs to get his hands on hard currency – US dollars He could not find anyone to sell him dollars His customers needed supplies and they needed them quickly, but how was he going to come up with the $30,000 – the hard currency – to pay for his most recent order? Exhibit 1 Venezuelan Official and Gray Market Exchange Rates, Venezuelan Bolivar/U.S. Dollar (January 2002–March 2004) Why does a country like Venezuela impose capital controls? In the case of Venezuela, what is the difference between the gray market and the black market? Create a financial analysis of Santiago’s choices and use it to make a recommend a solution to his problem. Why does a country like Venezuela impose capital controls? Capital controls allow a country to preserve a fixed rate of exchange for its currency without risking its holdings of hard currency or foreign currency reserves. The problem, ho