Bogota: The devaluation of the bolivar is raising questions about the benefits and fallout for the country's economy. Here are some of the major issues surrounding the issue:
What does Chavez gain?
He gets more near-term fiscal stability, more cash as dollar-based oil revenues yield more local bolivars and a possible stimulus to an economy hit by global recession.
The measure helps Chavez unleash spending on social programmes and state worker salaries in the months before September's legislature election.
What is the likely impact on the Venezuelan economy?
In economic terms, the devaluation clearly helps reduce Venezuela's debt financing needs, narrows its fiscal deficit and allows the central bank to generate more revenues for the government.
A Royal Bank of Scotland report sees Venezuela's central government fiscal deficit cut to 3.2 per cent of GDP from 7.4 per cent while borrowing financing needs will be reduced by $10 billion for 2010. That will reduce issues of dollar debt and push up bond prices. But the measure could drive up inflation.
Moody's said the devaluation will prolong the recession into the second half of the year as consumption falls and business steer away from increasing manufacturing output.
What about foreign businesses?
The outlook for foreign companies looks mixed. Analysts say US consumer companies such as Colgate-Palmolive and Avon Products are likely to feel the pinch on earnings as many of their goods sold in Venezuela will be considered non-essential and must use a higher exchange rate.
Importing raw materials into Venezuela to manufacture goods will costs some foreign companies more. Companies have struggled to get access to currency to repatriate profits under the country's strict currency control system.
