By Brian Ellsworth and Diego Ore
CARACAS Dec 16 President Nicolas Maduro's
government said on Monday it is revamping Venezuela's
decade-long exchange controls by expanding the use of a
complementary currency auction system to fight against a rampant
black market for dollars.
That would mean more dollars exchanged at a higher price in
bolivars and a reduction in transactions at the cheaper official
rate - a measure bound to be viewed by some economists as a
partial or disguised devaluation of Venezuela's currency.
Currency exchange from tourism in-flows, oil investments,
and the central bank's gold purchases will be done via the Sicad
auction system, said Oil Minister Rafael Ramirez, giving those
sectors a rate more favorable than the official one.
"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.
"Our plan is to defeat the parallel (black) market and make
State 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 in early 2013 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.
"Eventually, Cadivi will give way to another mechanism and
another structure for assigning foreign currency," he said.
"Sicad will continue and turn into a definitive mechanism for
controlling and handling our foreign currency."
Ramirez 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.
Venezuela's annual inflation rate topped 54 percent in
October. The central bank is now almost a week behind schedule
in releasing the November figure.
Monday's announcements represent "an incentive to
investments in the oil sector because you now get more bolivars
for your money," said Alberto Ramos, Goldman Sachs analyst.
"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."
Since taking power in April, economic problems have been
Maduro's main challenge as he seeks to preserve the socialist
legacy of his predecessor Hugo Chavez.
Economists had seen some sort of devaluation as inevitable,
but they are always unpopular due to their inflationary impact.
Ramirez echoed calls by other officials for Venezuelans to
contemplate higher prices of highly-subsidized gasoline -
signaling the state's desire to shore up its finances amid
soaring inflation and chronic product shortages.
At $0.01 per liter, Venezuelan gasoline is the world's
"We need to have a national discussion as to whether or not
we've reached the moment we need to start charging for
gasoline," he said, adding the subsidy costs $12.5 billion
annually. "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. There was, however, one adjustment in 1997
Years of double-digit inflation have gradually eaten away at
the fixed price and create 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, or 72 liters of gasoline
for the cost of a bottle of mineral water.
"It makes no sense whatsoever ... Not even Saudi Arabia has
the price we have."
The government says Cadivi was covering more than 90 percent
of Venezuelan importers' needs - or about $33 billion so far
this year. But private consultancy Ecoanalitica has estimated 30
percent of products are now indexed at the black market rate.
The preferential 6.3 rate for dollars will be maintained for
priority sectors such as food, medicines and education.