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Argentina

Latin American Currency Devaluation: Old Trick, New Deficits

Argentina and Venezuela are again trying to wiggle their way out of spending deficits by devaluating their currencies. It’s a short-term fix with long-term consequences.

Banco de Venezuela in Santa Ana de Coro.
Banco de Venezuela in Santa Ana de Coro.
Farid Kahhat*

LIMA — Surely there have been sufficient experiments in Latin America with exchange and price controls, enough to foresee their consequences. Just cross the supply and demand curves on a Cartesian plane to see what happens when prices are fixed for a long time, at rates notably below their level of equilibrium: There are shortages, as demand begins to exceed supply. Meanwhile, the goods in question are only plentiful in illegal markets — but at a considerably higher price.

The same tends to happen with dollar rates. There is sufficient historical experience to show that indiscriminate subsidies do not necessarily lead to a progressive redistribution of incomes in favor of the less fortunate.

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Geopolitics

Venezuela-Iran: Maduro And The Axios Of Chaos In The Americas

With the complicity of leftist rulers in Venezuela, Bolivia and even Argentina, Iran's sanction-ridden regime is spreading its tentacles in South America, and could even undermine democracies.

Venezuelan President Nicolás Maduro visiting Iranian President Ebrahim Raisi in Tehran, Iran on June 11. Venezuela is one of Iran's closest allies, and both are subject to tough U.S. sanctions.

Julio Borges

-Analysis-

CARACAS —The dangers posed by Venezuela's relations with the Islamic Republic of Iran is something we've warned about before. Though not new, the dangers have changed considerably in recent years.

They began under Venezuela's late leader, Hugo Chávez , when he decided to turn his back on the West and move closer to countries outside our geopolitical sphere. In 2005, Chávez and Iran's then president, Mahmoud Ahmadinejad, signed collaborative agreements in areas beyond the economy, with goals that included challenging the West and spreading Iran's presence in Latin America.

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