A 2.4 kg chicken sits next to 14,600,000 bolivars – its price at a Caracas market last week, and the equivalent of $2.22. REUTERS/Carlos Garcia Rawlins
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Venezuelan President Nicolas Maduro carried out one of the greatest currency devaluations in history over the weekend – a 95-percent plunge that will test the capacity of an already beleaguered population to stomach even more pain. One likely outcome is that inflation, which already was forecast to reach 1 million percent this year, will get fresh fuel from the measures.Prices are currently rising at an annualized rate of 108,000 percent, according to Bloomberg's Cafe con Leche index. The value added tax will rise 4 percentage points and officials will end some gasoline subsidies, saving the government $10 billion a year, Maduro said, without providing more details.In 1983, President Luis Herrera Campins devalued the bolivar for the first time in 22 years after oil prices crashed.When in 1989 Venezuela raised gasoline costs, lifted foreign-exchange controls and let the currency plunge, prices soared 21 percent in one month alone, leading to riots known as the "Caracazo" that killed hundreds and eventually paved the way for Chavez's rise to power.It's not clear how the shock measures announced by Maduro will sit with one of his key allies: the military.
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