1. Money
Justin Kuepper

Venezuela Devalues Currency, But Not By Enough

By February 11, 2013

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Venezuela announced another currency devaluation over the weekend, lowering the bolivar's value from 4.3 per U.S. dollar to 6.3 per U.S. dollar. While the move sparked some protests and lots of last minute shopping, many economists believe that it won't be enough to solve the country's chronic inflation following strict currency controls in 2003.

The government's action will reduce the country's fiscal deficit by between 7% and 15%, according to some sources, since the government must effectively pay for its currency's overvaluation out of pocket. Since the country imports a third of its goods and counts only oil as its primary export, many economists see a further (already at 20%) bout of inflation coming.

International investors will want to keep an eye on many ETFs with exposure to the country, including iShares Emerging Markets High Yield Bond ETF (EMHY) (18%) and Market Vectors LatAm Aggregate Bond ETF (BONO) (8%). Meanwhile, international companies like P&G are also suffering from the devaluation - obtaining about 1% of their revenue from the country.

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