Chavez Expected to Devalue Bolivar

After having lost a few key regions in the recent sub-national level, and facing the effects of low oil prices on government revenue, Chavez is expected to focus on managing Venezuela’s economy. Alejandro Grisanti, LatAm research director at Barclays believes he will be forced to devalue the bolivar at the beginning of 2009 to balance the country’s fiscal accounts. HSBC estimates that the Bolivar is some 40% overvalued and expects a managed devaluation to a level close to VEB3.00 from a current VEB2.15/USD.