February 15, 2014 / 3:11 PM / 5 years ago

Venezuela devalues Sicad foreign exchange rate by 3 pct

CARACAS, Feb 15 (Reuters) - Venezuela’s central bank devalued the Sicad foreign exchange rate, one of two rates in the country’s currency control system, by 3 percent to 11.7 bolivars per dollar, the government said on Saturday.

Sicad, which offers the less preferential of the two rates in the dual-rate system, distributes dollars through auctions in which the central bank fixes the minimum exchange rate.

This means that the rate is ultimately determined by the authorities, rather than being based on demand.

The most recent auction sold $222 million to 785 companies. It had originally offered $440 million, but authorities determined that nearly half of the requests did not qualify.

The currency control system sells dollars for 6.3 bolivars for preferential goods such as food and medicine, while offering the Sicad rate for items such as foreign travel and remittances.

The black market for dollars is now close to 87 bolivars, according to a widely watched website. 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.

Those who have access to cheap dollars have the constant temptation of flipping them for a quick profit, rather than importing goods needed to keep the economy running. That spurs nagging product shortages which hobble growth.

President Nicolas Maduro has vowed to create a new currency mechanism, known locally as “permuta,” based on bond swaps. It would let private companies and individuals sell dollars rather than leaving that task exclusively to the central bank.

The new system, which Maduro has dubbed “Sicad 2,” would likely offer dollars at a significantly weaker rate than the two official rates. (Reporting by Brian Ellsworth; Editing by Daniel Wallis and Marguerita Choy)

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