Venezuela’s currency has plummeted to record lows as concerns mount over the Trump administration’s latest measures targeting the nation’s oil industry. The sharp depreciation of the bolivar comes in the wake of a newly announced 25% tariff on countries purchasing Venezuelan crude, a move designed to exert further pressure on President Nicolas Maduro’s government.
The decision has already led to major disruptions in Venezuela’s oil exports. India’s Reliance Industries Ltd. has halted shipments, while Spanish energy giant Repsol rerouted a tanker, adding to fears of an imminent financial crisis. The impact is being felt acutely in Venezuela’s currency market, where oil revenues play a crucial role in stabilizing the exchange rate. With a severe shortage of dollars expected, businesses and individuals are turning to the black market, causing the parallel exchange rate to weaken further. On Thursday, the bolivar depreciated to 106 per dollar, a stark drop from 66 at the beginning of the year, marking the widest gap between official and parallel rates in more than five years.
“This is the strongest measure a U.S. administration has taken against the Venezuelan government from a cash flow and oil production perspective,” said Alejandro Grisanti, director of consultancy firm Ecoanalitica.
The fallout threatens to derail the fragile economic stability the Maduro administration had achieved by permitting broader use of the U.S. dollar. The crisis is intensifying at a precarious time, as Venezuela’s economy is projected to shrink for the first time since 2020, according to a survey by the opposition-led Observatorio de Finanzas. Meanwhile, the central bank’s liquid reserves are dwindling, making oil revenues even more critical for maintaining liquidity in the official exchange market.
Compounding the crisis, U.S.-based oil giant Chevron Corp. has been given a 60-day deadline to wind down its Venezuelan operations. Anticipating Chevron’s exit, the government has already halved its dollar sales to the exchange market this year, according to data from Ecoanalitica.
Maduro’s options to stabilize the situation appear limited. One possibility includes loosening regulations on retailers, allowing them to set prices independent of the official exchange rate, according to Jesus Palacios, a Caracas-based economist at Ecoanalitica.
“The government could be more permissive with the regulatory framework governing foreign currency transactions,” Palacios said. However, without corrective action, the situation is likely to deteriorate further, he warned.
As the exchange rate crisis deepens, businesses are struggling to restock inventories, exacerbating inflationary pressures. Additionally, a recent government decision to reduce working hours for public employees as part of an energy conservation plan has fueled concerns over domestic consumption.
The ongoing turmoil has further eroded confidence in the government’s ability to manage the exchange rate, said Venezuelan economist Jose Manuel Puente, an associate professor at IE University in Madrid.
“It’s the perfect storm for the currency to continue weakening,” Puente said.
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