March 7, 2014 / 1:00 AM / 4 years ago

Venezuela says new currency platform to begin operations Monday

CARACAS, March 6 (Reuters) - Venezuela on Monday will begin operations of a new currency platform designed to ease the OPEC nation’s dollar shortages through a market-based mechanism, the country’s top economic official said on Thursday.

The platform called Sicad 2 will add a third exchange rate to the 11-year-old currency controls that sell dollars at 6.3 bolivars for preferential goods and at 11 for other items, both far below the 80 bolivars that greenbacks fetch on the black market.

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

“This mechanism will, as established by the law, allow for (currency) transactions between private individuals, and it’s going to function soon ... it will begin operations as of Monday,” Economy Vice President Rafael Ramirez said in comments broadcast on state television.

The black market has steadily strengthened over the last week after reaching nearly 90 bolivars, driven in part by expectations that the new system could boost dollar supplies.

The country has suffered chronic shortages of basic goods ranging from toilet paper to corn flour as the 11-year-old currency control mechanism has left businesses struggling to obtain the dollars they need.

The government last month paved the way for Sicad 2 by reforming the Exchange Crimes Law to allow businesses and individuals to take part in foreign exchange transactions. That activity had been previously reserved for the central bank.

Sicad 2 will hold auctions every day, with the amount on offer to be based on demand rather than a set amount, Ramirez said last month.

Buyers will not have to describe what the dollars will be used for when they bid, unlike in other foreign exchange mechanisms that exist under the currency controls.

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