“Currency devaluation is typically an event resulting from a policy (political) decision and is often associated with nations choosing to “fix” the exchange rate of their national currency against another currency of the nation (or region) or some other fixed standard” (Owen, 2005). In other words, devaluation occurs in a situation where a country operates under a fixed exchange rate regime and its government decides to lower the value of its currency relative to the currency to which it is pegged. In the case of Venezuela, the bolívar fuerte is pegged to the US dollar. One government goal generally associated with devaluation is improving the trade deficit. If a country's imports are greater than its exports, devaluing the currency can help, as it reduces "the purchasing power of the domestic currency in terms of foreign goods and increases the purchasing power of the foreign currency in terms of domestic goods." (Johnson, 1971). . This in effect means that domestic goods (exports) become cheaper and imports become more expensive, resulting in an increase in demand for exports, a decline in imports, and therefore an improvement in the balance of payments. As the largest oil-producing nation in South America, Venezuela receives the majority of its export earnings from this sector. It is therefore not surprising that devaluation is so attractive to their policymakers, since greater demand for their oil exports would allow them to accumulate more domestic monetary resources. However, one implication of this policy has been the negative effect on the poor who spend most of their income on food and other necessities, which are mainly imported goods. With an average inflation between 20 and 30%, this means that fewer goods are found... in the middle of the paper... he cites Mundel's theory (1960) and states that: "According to this theory, it is impossible to have simultaneously a fixed exchange rate, free movement of capital (absence of capital controls) and an independent monetary policy. In conclusion, a monetary devaluation whose primary objective is to improve the balance of payments has both advantages and disadvantages , has caused more harm than good to the economy if the government were to attempt to borrow, very few investors would be willing to hold Venezuelan government debt as it would be considered very unattractive and risky. Many cases are known to reduce the creditworthiness of an economy in global markets. Ultimately, this could also result in an outflow of investments as investors may feel that the risk is too high for them when investing in Venezuela..