And already, because of inflation in Brazil and price deflation in Argentina, the real exchange rate between them is close to its pre-devaluation level.

ECONOMIST: Another president caught in Argentina’s economic trap | The

Indeed, a forced devaluation may do much more harm to investor confidence than continuous exchange-rate fluctuations.

ECONOMIST: Exchange rates

With a fixed and overvalued exchange rate, Chavez will rely on tough spending cuts (after a pre-election bonanza) and devaluation, which would act as a de facto tax hike.

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