February 20, 2014 / 3:21 AM / 5 years ago

Venezuela's Maduro signs decree creating new forex system

CARACAS, Feb 19 (Reuters) - Venezuela’s President Nicolas Maduro signed a long-awaited decree creating a new foreign exchange system, “Sicad 2”, and said full details would be provided on Thursday.

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

In a nationally-televised broadcast late on Wednesday, Maduro signed the decree creating Sicad 2, which he said would work better than its predecdessor. And he said his vice president for the economy, Rafael Ramirez, would explain on Thursday how it works.

Sicad has been distributing 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 black market rate 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.

Sicad 2 is expected to use a 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.

“Although they haven’t yet explained the specific mechanisms of the new exchange system, its general announcement is positive for the market,” said analyst Luis Vicente Leon. (Reporting by Daniel Wallis; Editing by Ron Popeski)

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