Venezuela auctions dollars; value is estimated at double the official rate
Venezuelan government foreign currency auction for local importers has triggered de-facto currency devaluation, the second in less than 50 days, analysts said. Venezuela has had strict currency exchange controls since 2003 in an attempt to halt capital flight, under which the government sold limited amounts of foreign currency at an official rate.
But the hunger for dollars and Euros persisted, fuelling a black market with a much higher exchange rate that by law cannot be published.
The government scrapped a program that exchanged currency at a rate of 5.3 Bolivar per dollar because officials said it allowed for speculation, and dollars wound up on the black market.
Instead, it launched a new plan known as SICAD through which it auctioned 200 million dollars last week to a group of chosen companies. The government said that 383 companies participated, but did not name them or reveal the sale price of the dollar.
Critics say the auction was an attempt by the government of acting President Nicolas Maduro to ease a demand for basic goods everything from food to office and hospital supplies, in this import-dependent country ahead of the April 14 presidential election.
The government did not announce the results of the foreign currency auction because clearly we are facing a new currency devaluation, claimed economist Jose Guerra. He estimated that the dollars went for around 12 Bolivar per dollar, much higher than the official rate of 6.3 Bolivar per dollar.
This is another devaluation Caracas Chamber of Commerce chief Victor Maldonado told the privately-owned Globovision TV. This also will mean that the costs and prices of the companies will have to be adjusted.
Finance Minister Jorge Giordani promised to find a way for individuals to also obtain foreign currency through the SICAD program, which he said offers transparency in the exchange rate system.
In February, Venezuela devalued the Bolivar by 32% against the US dollar, its fifth currency devaluation in a decade.
Econometrica head Angel Garcia Banchs said the SICAD program will be used to carry out more devaluations throughout the course of the year, which will to finance government expenses and help with US dollar debts run up by the state-run oil giant Petroleos de Venezuela.
But Guerra, a former top official at the Central Bank, said SICAD will be insufficient to satisfy the demand of foreign currency in Venezuela.
One effect of the devaluation is to make a country's exports cheaper and thus more enticing to buyers, while another is to cut the deficit, which in Venezuela last year was estimated to be nearly 16% of GDP.
The economy grew 5.5% in 2012 and inflation was 20%, down seven points from 2011 but still the highest official inflation rate in Latin America behind Argentina.