Reuters: Regulatory News: UPDATE 1-Venezuela to ease foreign currency regime - source

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UPDATE 1-Venezuela to ease foreign currency regime - source Jun 23rd 2013, 20:56 Sun Jun 23, 2013 4:56pm EDT By Eyanir Chinea CARACAS, June 23 (Reuters) - Venezuela will make its foreign currency system more flexible by reviving a stalled dollar-auction in July and then allowing a revival of a free-floating secondary mechanism after that, a source in the government's economic team said on Sunday. Venezuela has operated currency controls for a decade. Restricted access to dollars at the official rate of 6.3 bolivars are a major gripe for local businesses and a cause of the South American OPEC nation's slowing growth rate. But the government of newly-elected President Nicolas Maduro will allow in July a renewal of the so-called Sicad system, under which dollars were sold - reportedly for as much as 14 bolivars - to businesses in a first round in March, the Finance Ministry source said. After another Sicad auction, authorities will then allow a revival of a system, prohibited since 2010, under which dollars are sold by private brokers at a floating rate dependent on a complicated formula linked to bond prices, the source added. That system is known locally as a "swap" mechanism. Both those methods would run alongside the fixed system, under which businesses are allowed to access dollars at 6.3 bolivars for some priority goods such as medicines and essential foods. "The idea is to go with Sicad in July," said the official, who asked not to be named. "Then what we want is to move to a secondary market, a swap market, with the private players." The government's intention is to squeeze trading on the illegal black market, and to bring down the price of the dollar there. Greenbacks bought on the black market currently fetch more than five times the officially-fixed rate. Authorities are also under pressure to get more dollars into the hands of importers. Some private economists and government critics argue it is time that Maduro abandons altogether the currency controls, which date from the era of his predecessor Hugo Chavez. They say the failure of such socialist economics are evident in the shortages, high inflation and slowing growth that Venezuela's 29 million people are suffering. But Maduro argues that private businessmen and "speculators" have been deliberately hoarding products and sabotaging the economy in order to undermine his rule. He won an April vote to replace Chavez by just 1.5 percentage points. Link this Share this Digg this Email Reprints

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