The fact that over half of FX transactions in Venezuela have already been forced onto the black market – where the bolivar trades at much weaker rates – means that the country has already seen a sharp fall in its “effective” exchange rate. Even so, we expect the currency to weaken further, perhaps by as much as 40% against the US$, after the state governor elections in December. And if oil prices decline next year, as we expect, the bolivar could eventually fall by much more.
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