"The currency, the bolívar, will be set at 6.3 to the dollar. It had been set at 4.3...Government spending soared last year during the campaign to re-elect Mr.
Chávez, leading to a large deficit, even though, at more than USD 100 a
barrel, the price of oil is very high...Pressure to devalue had been building for months, as the black market
exchange rate rose to more than four times the official rate. The
imbalance was evident in the prices of many goods. A Big Mac at
McDonald’s costs 70 bolívars, or USD 16.27, at the official pre-devaluation
rate. But the devaluation will also make imported goods more expensive, which
will probably make inflation worse. Inflation for the 12 months ended on
Jan. 31 was 22.2 percent, one of the highest rates in Latin America"
What is going on here? The Venezuelan (Chavez) government went on a spending spree last year prior to elections. Despite having the world's second (or perhaps first?) largest oil reserves they are now drowning in red ink. Oil is priced in US Dollars so the government receives USD for the oil that the state oil company PDVSA sells to the world market. Venezuelan importers / exporters swap USD for Bolivar's through the Venezuelan Central Bank's Cadivi system. By devaluing the Bolivar that means for each USD the government receives for oil they will get more Bolivars which they can use to cover their deficit. But the cost is that importers will now have to pay more Bolivars for each USD and hence the price of imported goods will go up. So effectively the Venezuelan government is taxing imports to cover their deficit.
Here is betting there is more to come. Their economy is a mess.
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