UPDATE 3-Venezuela central bank to sell $200 mln in forex auction

Thu Jul 11, 2013 7:18pm EDT

By Eyanir Chinea

CARACAS, July 11 (Reuters) - Venezuela's central bank said on Thursday it will sell $200 million at auction under its revamped currency exchange system, as the government seeks to boost the flow of dollars to importers and address voters' complaints about nagging product shortages.

The bank said that $170 million would be allocated to businesses and $30 million to individuals in the auction under the revamped system, known as Sicad.

The auction would begin on Friday and end on Tuesday, it said, adding that only companies registered in eastern Nueva Esparta state and western Falcon state, and firms in the automotive and health sectors would be allowed to take part.

The businesses can place orders with a minimum value of $8,000 and a maximum of $1.02 million. Individuals traveling abroad can request between $500 and $2,500.

The auction results will be compiled and announced on Wednesday, the central bank said, and dollars will be paid out on July 19.

The Sicad system, which operates in parallel with a decade-long currency control mechanism, will provide dollars at a higher rate than the official exchange rate of 6.3 bolivars.

That will further weaken the bolivar after a devaluation in February helped push annualized inflation to almost 40 percent.

It will be the second Sicad auction and follows one in March when $200 million was sold - representing a fraction of Venezuela's monthly import bill.

Since then, the authorities have revamped the system and plan to hold at least two auctions a month while also cutting some of the red tape that business leaders say is cumbersome.

The bank did not give an expected price range for the auction, but local economists forecast Sicad will sell dollars at around 15 bolivars each - more than twice the official rate but around half the price that greenbacks fetch on Venezuela's black market.

Speaking in Venezuela's eastern oil city of Maturin, Energy Minister Rafael Ramirez said state oil company PDVSA would sell some of its dollars via Sicad. Of every 10 dollars that enters Venezuela's economy, nine come from PDVSA's oil exports.

The changes to Sicad move Venezuela toward a more market-based economy after vast expansion of state control during the 14-year rule of the late socialist leader Hugo Chavez.

President Nicolas Maduro, who won an April election after Chavez's death from cancer, faces so-called stagflation as the economy slows and consumer prices rise.

Venezuelan businesses have complained for months that lack of access to hard currency has stopped them from importing consumer staples ranging from wheat flour to toilet paper.

Importers of consumer staples will not be allowed to buy dollars in the upcoming auction, but they are expected to be permitted to do so in later auctions.

FILED UNDER: