By Brian Ellsworth and Diego Ore
CARACAS Dec 16 Venezuela said on Monday it is
revamping its decade-long exchange controls by expanding the use
of a complementary currency auction system to stop capital
flight and combat the black market for greenbacks.
Currency exchange linked to tourism, oil investments, and
the central bank's gold purchases will be carried out via the
auction system known as Sicad, said Oil Minister Rafael Ramirez,
giving those sectors a rate more favorable than the official
He also echoed calls by other officials for Venezuelans to
contemplate higher prices of their highly-subsidized gasoline,
signaling the state's desire to shore up its finances amid
soaring inflation and chronic product shortages.
"We are opening up channels so dollars can come in not only
through oil income but also through other sectors," Ramirez, who
is also economy vice president, told reporters.
The currency control agency Cadivi sells dollars at the
official rate of 6.3. But greenbacks fetch more than 10 times
that on the black market as delays and restricted access via
Cadivi leave businesses struggling to pay offshore providers.
The Sicad system was created to sell dollars at a rate that
has not been officially disclosed but is believed to fluctuate
in different auctions at around 12 bolivars.
Ramirez said the auction system would gradually begin to
displace Cadivi, which even ruling party officials recognize has
lost tens of billions of dollars over the last two years to fake
imports by shell companies.
Boosting the use of Sicad "will allow us to combat the
parallel (black) market, which is one of the things that has
done the most damage to our economy," Ramirez said.
He said Sicad would bring in $6 billion next year through
oil investments, helping address the complaints of oil companies
who say high inflation combined with a fixed official exchange
rate makes operations prohibitively expensive.
"It is an incentive to investments in the oil sector because
you now get more bolivars for your money," Alberto Ramos,
Goldman Sachs analyst, told Reuters.
"Secondly, they want to divert more transactions away from
Cadivi and into Sicad. So in that respect it is akin to a
stealth devaluation of the bolivar without the political cost."
Echoing recent comments by the country's vice president,
Ramirez said Venezuelans should consider supporting an increase
in the price of gasoline that is now the world's cheapest.
"We need to have a national discussion as to whether or not
we've reached the moment that we need to start charging for
gasoline," he said, adding the subsidy costs $12.5 billion each
year. "This is a major distortion."
Officials have been reluctant to raise the price of gasoline
since 1989 due to riots then that were triggered in part by a
fuel price hike, though Venezuela did raise prices in 1997
Close to a decade of double-digit inflation has gradually
eaten away at the fixed price and creates huge losses for state
oil company PDVSA. Ramirez pointed out that a consumer can buy
250 liters of diesel for the cost of a soft drink.