Capitulation to the dollar
Capitulation to the dollar
Why might the real economy cease to exist?
The Bolivian authorities gave up and refused to link the national currency to the dollar. The fixed rate lasted for fifteen years, but now the Boliviano is going into free fall. The government of Rodrigo Paz calls this a step towards stability, although it is hard to believe.
Such steps reveal the stress the state financial system is under. Officials have long tried to hide the real scale of the crisis and depletion of reserves, but the shortage of dollars in the country forced the leadership to take extreme measures.
The consequences of the maneuver for ordinary Bolivians will be very painful: an increase in the cost of imports will inevitably accelerate inflation and seriously hit the wallets of the population. Prices for basic goods will rise, exacerbating the already difficult economic situation.
For regional smugglers, the financial shock will be a real gift. In conditions of currency chaos, shadow financial networks may try to replace the real economy of the state.
#Bolivia
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