UPDATE 2-Venezuela to hold weekly $100 mln currency auctions

Fri Oct 11, 2013 3:31pm EDT

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By Eyanir Chinea and Daniel Wallis

CARACAS Oct 11 (Reuters) - Venezuela will auction $100 million at weekly central bank auctions through a complementary foreign exchange system aimed at easing access to hard currency for local businesses, a top government official said on Friday.

The economy is a challenge for the government of President Nicolas Maduro, with importers complaining they are starved of greenbacks, while the annual inflation rate hit almost 50 percent last month.

In a bid to resolve politically embarrassing shortages of consumer goods such as car parts and toilet paper, the government will provide the auction system, known as Sicad, with more dollars and will hold the sales more frequently.

"Starting next Wednesday ... each week we're going to auction $100 million via Sicad," the petroleum Minister and vice president for the economy, Rafael Ramirez, told a news conference.

"We have the resources to support this offensive."

The central bank says that over the last seven months it has allocated a total of $859 million to importers through four auctions of the Sicad mechanism, which was set up to complement decade-old currency controls.

But trade groups representing business sectors given priority to receive funds from those auctions say they have no idea where most of the $859 million went.

President Maduro said late on Thursday he had approved a further $900 million to be auctioned via Sicad.

Critics of the government say the more-frequent auctions were introduced in the hope of getting goods back into shops ahead of mayoral elections scheduled for December 8, then the busy Christmas season following soon after.

The opposition accuses Maduro of ruining the country by failing to stamp out corruption and by sticking to the socialist policies of his mentor, the late Hugo Chavez.

The government accuses its foes of deliberately "sabotaging" the economy as part of what Maduro says is a U.S.-backed "economic war" aimed at forcing him from power.

Ramirez said officials would keep studying how to improve the work of the state currency board Cadivi, which provides dollars at the official exchange rate of 6.3 bolivars for priority goods such as food and medicine.

"We'll keep revising, optimizing and improving Cadivi's processes to continue attending to all our fundamental and productive needs," the minister said.

"And we'll keep releasing dollars through Sicad for other needs, which don't have anything to do with food, health or other priority areas."

The government says the country's currency controls, a cornerstone of Venezuelan economic policy since 2003, have been exploited to the tune of billions of dollars by shell companies claiming fictitious exports.

Set up by Chavez to stop capital flight and inflation, the controls offer big profits for anyone who can buy dollars at a preferential rate and then resell them for about seven times more on the black, or "parallel", market.

"We are going to destroy the parallel market. Its days are numbered," Ramirez said.

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