Venezuela eases currency controls to create new forex market

CARACAS Mon Feb 24, 2014 10:30am EST

CARACAS Feb 24 (Reuters) - Venezuela on Monday eased restrictions on the purchase and sale of hard currency, paving the way for a new foreign exchange platform meant to boost businesses' access to dollars under an 11-year-old currency control system.

The reform of the Currency Crimes Law allows businesses and individuals to participate in currency transactions, lifting previous restrictions that required all such operations to be carried out by the central bank.

This will allow for the creation of a currency exchange mechanism based on bond swaps, known locally as "permuta."

That market cannot begin operations until the government publishes additional foreign exchange regulations.

The new market, known as "Sicad 2," will hold currency auctions every day. That will add a third exchange rate to the currency control mechanism, which now sells dollars at 6.3 bolivars for preferential goods and at 11.7 for other items.

Venezuela's bolivar black market rate is approaching 90 to the dollar.

The country's bonds, which have strengthened on recent news of the new market, rose as much as 4 percent on Monday.