Venezuela to Announce Complementary Foreign Exchange System
By Nathan Crooks & Jose Orozco - Mar 18, 2013 11:30 PM CT
Venezuela will today publish specifications for a “complementary” foreign exchange system in the official gazette, acting President Nicolas Maduro said yesterday on state television.
The system will be administered by the Finance Ministry’s foreign currency board, led by Finance Minister Jorge Giordani, and will be used to close the gap between the official and unregulated “parallel” exchange rates, Maduro said.
“We have the will to defeat the parallel dollar, but we know that there are economic rules and methods,” Maduro said. “This complementary system will take that into account to bring down that parallel dollar, to defeat it.”
Before his death from cancer on March 5, former President Hugo Chavez in February approved a 32 percent devaluation of the bolivar to 6.3 bolivars per dollar. He also shut down a central bank-administered currency market known as Sitme that weakened the bolivar on the black market to about 23.5 bolivars per dollar.
Chavez, who established currency controls in 2003, in 2010 shut down an unregulated market operated by bond brokerages that supplied about $100 million a day to importers. That was reduced to $45 million a day after Chavez shuttered the market and replaced it with the Sitme, which was closed last month.
“It will be used for special cases,” Maduro said, adding that public and private banks would have access to the system that will supplement the government’s currency exchange known as Cadivi and begin operations by March 25.
Price Controls
The South American country will also announce new price controls, Maduro said, without providing additional details about the new currency system. The Central Bank will hold a news conference at 11:00 a.m. local time today in Caracas, central bank President Nelson Merentes said yesterday on state television.
“Dollars must be directed towards productive sectors of the economy,” Merentes said.
Venezuelan importers turn to the black market when they can’t get access to foreign currency at the official rate. The black market bolivar has weakened 26 percent to 23.5 bolivars per dollar this year, according to Dolar Today, a website that tracks the exchange rate on the Venezuelan border with Colombia.
“There is a corrupt right wing and a parasitic bourgeoisie betting on a destabilization of the economy; they’re behind the parallel dollar,” Maduro said.
The country has enough dollars to meet its exchange needs, he said.
Annualized inflation rose to 22.8 percent in February, the highest in ten months. The scarcity index, which measures the amount of goods that are out of stock on the market, fell to 19.7 percent last month from a record high of 20.4 percent in January, according to the central bank report.
By Nathan Crooks & Jose Orozco - Mar 18, 2013 11:30 PM CT
Venezuela will today publish specifications for a “complementary” foreign exchange system in the official gazette, acting President Nicolas Maduro said yesterday on state television.
The system will be administered by the Finance Ministry’s foreign currency board, led by Finance Minister Jorge Giordani, and will be used to close the gap between the official and unregulated “parallel” exchange rates, Maduro said.
“We have the will to defeat the parallel dollar, but we know that there are economic rules and methods,” Maduro said. “This complementary system will take that into account to bring down that parallel dollar, to defeat it.”
Before his death from cancer on March 5, former President Hugo Chavez in February approved a 32 percent devaluation of the bolivar to 6.3 bolivars per dollar. He also shut down a central bank-administered currency market known as Sitme that weakened the bolivar on the black market to about 23.5 bolivars per dollar.
Chavez, who established currency controls in 2003, in 2010 shut down an unregulated market operated by bond brokerages that supplied about $100 million a day to importers. That was reduced to $45 million a day after Chavez shuttered the market and replaced it with the Sitme, which was closed last month.
“It will be used for special cases,” Maduro said, adding that public and private banks would have access to the system that will supplement the government’s currency exchange known as Cadivi and begin operations by March 25.
Price Controls
The South American country will also announce new price controls, Maduro said, without providing additional details about the new currency system. The Central Bank will hold a news conference at 11:00 a.m. local time today in Caracas, central bank President Nelson Merentes said yesterday on state television.
“Dollars must be directed towards productive sectors of the economy,” Merentes said.
Venezuelan importers turn to the black market when they can’t get access to foreign currency at the official rate. The black market bolivar has weakened 26 percent to 23.5 bolivars per dollar this year, according to Dolar Today, a website that tracks the exchange rate on the Venezuelan border with Colombia.
“There is a corrupt right wing and a parasitic bourgeoisie betting on a destabilization of the economy; they’re behind the parallel dollar,” Maduro said.
The country has enough dollars to meet its exchange needs, he said.
Annualized inflation rose to 22.8 percent in February, the highest in ten months. The scarcity index, which measures the amount of goods that are out of stock on the market, fell to 19.7 percent last month from a record high of 20.4 percent in January, according to the central bank report.