Oranje over FX Venezuela
CARACAS (Reuters) – Venezuela may relaunch its so-called “permuta” foreign exchange mechanism as it seeks to supply more dollars to local importers who are complaining about lack of access to hard currency, President Nicolas Maduro said on Monday. The “permuta” system, which was shuttered by the government in 2010, would run alongside two existing exchange mechanisms: one run by the state currency board called Cadivi, and a second auction-based system, Sicad, run by the central bank. “Most likely we will launch a new system that will compliment Cadivi and Sicad. But we are evaluating it with different economic players, experts and economists,” Maduro said during a televised news conference.
“The real objective … is to stabilize the exchange market. Venezuela has enough dollars for the economy to work.”
Maduro, who narrowly won a presidential election in April after the death of his mentor Hugo Chavez, faces economic challenges including high inflation and slowing growth. Venezuela’s private sector – squeezed by state takeovers during Chavez’s 14-year rule – says delays, red tape and uncertainty over the supply of dollars have delayed imports.
“We are re-engineering (the system) to eliminate, remove some bumps … and some errors that were committed, in order to arrive quickly at an optimal balance point,” Maduro said. Under the “permuta” system, dollars were sold by private brokers at a floating rate determined by a complicated formula linked to bond prices. Under the official Cadivi system, the exchange rate is fixed at 6.3 bolivars per dollar.
The central bank does not publish the rate arrived at by its twice-monthly Sicad auctions, but participants say it has ranged between 10 and 11 bolivars per greenback.
Meanwhile, dollars sell on the black market for more than five times the official rate of 6.3.
The government wants to cut down illegal black market trading, and to bring down the price of dollars on the street.
Maduro said some 92 percent of Venezuela’s imports were bought with dollars purchased at the official rate. But a report by local think-tank Ecoanalitica said at least 30 percent of imports were purchased using dollars bought at a higher rate.
Some private economists and opposition politicians say Maduro should scrap the currency controls altogether, and that the failure of Chavez’s socialist policies has been proved by shortages in the shops, high inflation and slowing growth.
Maduro argues that businessmen and capitalist “speculators” have been deliberately hoarding consumer products and sabotaging the economy in an effort to undermine his rule.