Purpose - The Aim Of This Paper Is To Address The Following

Chapter 11: Global negotiations leave groups more fortunate. A government that is purposefully maintaining inflated currency is robbing buyers of imports and creators of exports. A deflated value has an opposing effect, making imports cheaper and exports less challenging. One piece of currency across the west reduces negotiations and encourages price transparency. However, the United States as an individual country are

On April 1, 1991, Argentina’s Congress, with Domingo Cavallo as Minister of Economy, enacted the Convertibility Law (or Ley de Convertibilidad) legally adopting the currency board (Hornbeck, 2002). This legislation essentially pegged the Argentinean peso to the U.S. dollar. The government guaranteed the convertibility of the peso to U.S. dollar at a one-to-one exchange rate, limiting the printing of pesos to only those necessary to purchase dollars in the foreign exchange market. Thus, the central bank was required by law to hold foreign reserves to cover its peso liabilities (Hanke and Schuler, 2002). With this fixed exchange rate, the Argentinean government was hoping to preserve the value of their currency and stabilize inflation. The peg was initially successful, as it cured hyperinflation that occurred at the end of the 1980s and provided price stability needed for economic growth in the early 1990s. However, by the late 1990s,

Currency exchange rates can be categorised as floating, in which case they constantly change based on a number of factors, or they can subsequently be fixed to another currency, where they still float, but they additionally move in conjunction with the currency to which they are pegged. Floating rates are a reflection of market movement, demonstrating the principles of both demand and supply, as well as limit imbalances in the international financial system. Fixed exchange rates are predominantly used by developing countries as they are preferred for their greater stability. They grant further control to central banks to set currency values, and are often used to evade market abuse. (MacEachern, A. 2008; Simmons, P.

Venezuela, located in the Latin American region, is a country that has been characterized by its abundance of oil reserve. A natural resource that has shaped the history and development of the country, affecting its economic, social and most important is political spheres. For many years Venezuela was controlled by authoritarian regimes. The country, being very important in the sense of geo-politics due to its abundance of oil, has been a key player in the international arena and most important, to those that for many years kept the country under their regime. It was not until 1958 that Venezuela experienced the change to democracy and a stable democracy was kept between the two main political parties of the time, Accion Democratica (AD)

Venezuela underwent a rollercoaster of economic and political reforms, “the exhaustion of the ISI model and the application of neoliberal policies opened the way for two decades of economic disorientation and social decomposition. This contributed to a political and institutional crisis that, at the end of the 20th century, appeared to be irreversible” (Lopez Maya, pg 235). The Chavez regime can be split into two parts before 2006 and after. In 1999 he attempted to strengthen democracy and search for social justice. As time passed the government suffered barriers but they were fueled by the idea a of a participatory democracy, entailing the need of a mixed economic model. After 2006 unfortunately a new chapter began, centralizing the power

Leading to a terrible crisis where the most affected were the poorest. When people were not able to buy dollars, businessmen turned to the black market, where exchange rates soared. In addition to this, the collapse of the currency was aggravated by oil’s low price, making the situation more difficult. After fourteen years of Chavez’ governance, Maduro took power and continued the economic model followed by Chavez. Even though he declared Venezuela as a state of emergency, he still refused to adopt capitalism to fix the crisis. He doesn’t want to have a trade with rich nations such The United States and, he is preparing for a hypothetical foreign

With an economy dominated by the production of oil, Venezuela has enjoyed the highest standard of living in Latin America. In spite of its success in the oil industry, agriculture and manufacturing also play important roles in Venezuela’s economy. With this in mind, it would seem as though Venezuela’s economic state has flourished. Rather, it has suffered from the effects of political influence, corruption, and poor economic management. The distribution of wealth across Venezuela has caused the elite to benefit at the cost of the working people. This is mainly due to the economic and political structure of the country. Even with the plentiful resources Venezuela possesses, it is constantly being threatened by political instability,

To achieve the aforementioned results, Peru’s Central Bank decided to accumulate large foreign exchange reserves at rate never before seen in Peruvian economic history (Dancourt, 2015). Additionally, Peru’s Central Bank has been

Chavez’s policies on the outside seem to be an effort to help the Venezuelan people and create a better lifestyle for citizens, and at first that’s what seemed to happen. Chavez believed in a socialist economy, and at the time looked at himself as an “anti-Bush” leader, often referring to George W. Bush as the devil and criticizing American politics. Having said this, the United States have been the largest buyers from PDVSA, Venezuela’s national oil company. Although socialism can be done correctly, the Venezuelan version of socialism turned out to be not-so-subtle authoritarianism. Inflation is currently at 720% (According to IMF May 2016 reports), and the economy has shrunk for seven consecutive quarters since 2014. Many blame the current crisis on three different causations: Chavez’s price restrictions on basic

Consequences regarding the international businesses and the flow of trade and investment among the three countries are given below as benefits and drawbacks of holding fixed exchange rate system-

However, it does not take an expert to draw the conclusion that Venezuela revenue is extremely volatile and economy situation directly dependent on the price of the oil barrels. The revenue generated by oil exports is the main source of foreign exchange, which is used in turn to import many food and consumer goods, as well as intermediate inputs for production. Venezuela is also heavily dependent on imports of goods such as raw materials, machinery, electronics, and food. In 2003, Chavez government started intervening in the currency control, introducing foreign exchange controls that varied between multiple or single exchange rates. When currency control was introduced, a dollar bought 1.6 bolivars; while today, the same dollar can buy 172 bolivars at one of the government 's exchange rates.

The main purpose of the following report is to provide information about the profile of The Bolivarian Republican of Venezuela; in order to study the current situation of the country for further investigations in the future that may help to understand the opportunities and risk involve in importing and opening new markets in Venezuela.

Countries with high openness level can fix their exchange rates and establish OCA to balance external payments. McKinnon believes that openness influences the choice of exchange rate regime. Real depreciation in a high economic open country will lead to inflation, the

dollar. In dollarization, the country abolishes its own currency and uses a foreign currency, such as the U.S. dollar, for all domestic transactions. 6. Emerging market exchange rate regimes. High capital mobility is forcing emerging market nations to choose between free-floating regimes and currency board or dollarization regimes. What are the main outcomes of each of these regimes from the perspective of emerging market nations? There is no doubt that for many emerging markets a currency board, dollarization, and freely-floating exchange rate regimes are all extremes. In fact, many experts feel that the global financial marketplace will drive more and more emerging market nations towards one of these extremes. As illustrated by Exhibit 2.5, there is a distinct lack of “middle ground” left between rigidly fixed and freely floating. In anecdotal support of this argument, a poll of the general population in Mexico in 1999 indicated that 9 out of 10 people would prefer dollarization over a floating-rate peso. Clearly, there are many in the emerging markets of the world who have little faith in their leadership and institutions to implement an effective exchange rate policy.

A fixed exchange rate regime will offer an economy greater stability in international prices and therefore encourage trade. Additionally, for developing countries a fixed rate will assist in promoting institutional discipline as the country will adopt restrictive monetary and fiscal policies that foster an anti-inflationary environment. A significant weakness of a fixed rate is that it is subject to destabilizing speculative attacks which could lead to financial meltdowns and devastating economic contractions. A floating exchange rate regime allows central banks to combat macroeconomic factors such as unemployment, inflation, and interest rates without having to worry about the effect on exchange rates. However, developing countries whose economies depend on trade will be reluctant to allow their exchange rates to fluctuate freely.