(Adds details on parallel market, Sicad auctions)
By Eyanir Chinea
CARACAS, June 23 Venezuela will make its foreign
currency system more flexible by reviving a stalled dollar
auction scheme in July and after that allowing a revival of a
free-floating secondary currency mechanism, a source in the
government's economic team said on Sunday.
Venezuela has operated currency controls for a decade, and
restricted access to dollars at the official rate of 6.3
bolivars are a major gripe for local businesses and a
cause of the OPEC member's slowing growth rate.
The Finance Ministry source said the government of
newly-elected President Nicolas Maduro will in July allow a
renewal of the so-called Sicad system. In a first round in March
of this year, dollars were sold to businesses for reportedly as
much as 14 bolivars apiece.
After another Sicad auction, authorities will then allow a
revival of a system prohibited since 2010, under which dollars
are sold by private brokers at a floating rate determined by a
complicated formula linked to bond prices, the source added.
That system is known locally as a "swap" mechanism.
Both those methods would run alongside the fixed exchange
rate system, under which businesses are allowed to access
dollars at 6.3 bolivars for some priority goods, such as
medicines and essential foods.
"The idea is to go with Sicad in July," said the official,
who asked not to be named. "Then what we want is to move to a
secondary market, a 'swap' market, with the private players."
The government's intention is to squeeze trading on the
illegal black market, and to bring down the price of dollars on
the street. Greenbacks bought on the black market currently
fetch more than five times the official fixed rate.
Authorities are also under pressure to get more dollars into
the hands of importers.
Some private economists and government critics argue now is
the time for Maduro to abandon the currency controls altogether.
They say the failure of such socialist economics, which date
from the era of his late predecessor Hugo Chavez, are evident in
the shortages, high inflation and slowing growth that
Venezuela's 29 million people are suffering.
GOV'T BLAMES SPECULATORS
One local think-tank, Ecoanalitica, estimates that some 140
billion U.S. dollars have left the country illicitly since the
currency controls were first put in place by Chavez's government
Maduro argues that private businessmen and capitalist
"speculators" have been deliberately hoarding consumer products
and sabotaging the economy in order to undermine his rule.
In the first quarter of this year, the state currency board
Cadivi opened investigations into more than 2,400 companies and
suspended more than 200 for what it termed foreign exchange
Until it was shuttered by the government in May 2010, scores
of brokerages had reaped a lucrative trade in foreign exchange
through bond swaps in what was known as the "parallel market."
That amounted to a $30 billion a year market and provided
dollars for, by some estimates, at least a quarter of imports,
before the authorities raided many of the brokerages, which the
Chavez government had accused of illegal money laundering and
With inflation running at a record monthly high of 6.1
percent in May and growth slowing to just 0.7 percent in the
first quarter despite high oil prices, Maduro has inherited
economic headaches only two months into his new job.
Next month's revival of Sicad is unlikely to bring quick
relief. Only $200 million was sold at the auction in March,
while economists estimate that the Venezuelan economy needs
around $100 million per day to cover the imports it needs.
Participants in Sicad have also complained that the process
is cumbersome since it supplies dollars directly to the foreign
provider of the goods, rather than the businesses importing
Venezuela has historically depended on imports to supply key
consumer goods, including much of its food. Critics of Chavez's
government say its policies, including nationalizations, hurt
the private sector and left the economy more reliant on imports.
Venezuela's non-oil exports at $145 million in March fell to
their lowest level since early 2009, 37 percent lower than
during the same month in 2012.
(Writing by Andrew Cawthorne and Daniel Wallis; editing by G