February 20, 2014 / 7:25 PM / 4 years ago

UPDATE 1-Venezuela to auction dollars daily in new market system

By Deisy Buitrago and Eyanir Chinea

CARACAS, Feb 20 (Reuters) - Venezuela’s long-awaited “Sicad 2” foreign exchange system will hold hard currency auctions every day, hopefully beginning from Monday, said the vice president for the economy, Rafael Ramirez.

The government gave few details on Thursday of the new system, which President Nicolas Maduro decreed into law late the night before. Sicad 2 seeks to ease a chronic shortage of hard currency that is hitting the import-dependent economy.

Venezuela’s complex currency control system currently uses two rates, one for essential goods such as food and medicine and a less-preferential Sicad rate, used for items such as foreign travel and remittances.

Ramirez said private companies and individuals will be able to sell dollars under Sicad 2, which will offer a third rate that will likely be less favorable through a currency mechanism known locally as “permuta” based on bond swaps.

“We have extra resources and we are going to continue putting them into this market ... (Sicad 2) will be available every day,” Ramirez told reporters.

“There will be a fluctuating rate as a result of the demand that is being created ... but of course we in the central bank will intervene offering more funds when needed, because the idea of all this is to make the (black market rate) decline.”

Venezuela’s bolivar black market rate is approaching 90 to the dollar, far weaker than the official rate of 6.3 bolivars to dollar for essential imports, and the 11.7 dollar rate offered by the current Sicad system launched in 2013.

Sicad takes its name from the Spanish acronym for the Complementary Administration System for Foreign Exchange.

Venezuelan global bonds rose as much as 2.6 percent on Thursday despite a rout over the last week caused by ongoing opposition demonstrations that have left at least 5 people dead.

Investors see the new system as positive for bondholders because by offering a weaker exchange rate, it will free up more hard currency to make debt payments.

Ramirez said the complete text of the law will be published on Friday, and that he would brief the press on it again. Public and private banks, along with brokerages, would be allowed to take part in Sicad 2, he said.

Economists say the huge gap between the official rates and the spiraling black market rate is one of the main problems of the OPEC nation’s economy.

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