Venezuela's Finances Worsen

Venezuela may soon have to decide whether it wants to be politically popular or economically sustainable. Officials in Caracas recently introduced several measures meant to encourage imports of consumer goods, but Venezuela's foreign exchange reserves currently appear too low to reliably finance government spending, at least in the medium term. Venezuela will probably have to allow the bolivar to depreciate substantially through a new exchange system and sell gold from its reserves to inject sufficient foreign currency into the domestic market to ameliorate shortages. Without a clear solution, growing inflation will cause political problems for Venezuelan President Nicolas Maduro.