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Venezuela Said to Consider New Currency Policy

Venezuela is considering revamping a central bank system used to control the foreign-exchange rate after the bolivar fell to a record low in black-market trading, said a government official with direct knowledge of the matter.

The central bank is selling fewer dollars on the Sitme system at a rate of 5.3 bolivars per U.S. dollar to limit its losses as the Venezuelan currency is trading above 13 in the unregulated market, said the official, who spoke on condition of anonymity because no final decision has been made. The person declined to provide additional details other than saying scrapping the Sitme was a possibility.

Declining trading volumes in the Sitme are fueling speculation that President Hugo Chavez will devalue the bolivar after winning re-election, said Asdrubal Oliveros, director of Caracas-based financial consultancy Ecoanalitica. Only $18.8 million was sold on the Sitme yesterday, the lowest amount since December 31, 2010, according to data compiled by Bloomberg.

“We have information that the central bank is worried about the future of the Sitme and the rise of the dollar on the black market,” Oliveros said today in a telephone interview. “For now, the finance ministry and central bank have not been able to agree on a solution.”

Sitme volumes have declined during the past weeks, with the 7-day moving average at $31.3 million, the lowest level since August 2011, Bank of America analyst Francisco Rodriguez wrote in a Nov. 8 note to clients.

Spending Surge

Chavez, who won last month’s election by more than 11 percentage points after increasing spending by 20.5 percent in real terms in the first nine months of the year, will need to devalue the currency in the first quarter of 2013 to boost oil revenue and help close a fiscal deficit, Rodriguez said.

Press officials at both the central bank and the Finance Ministry in Caracas declined to comment on the country’s exchange policies today.

The local currency has weakened 36 percent this year to 13.65 per dollar on the unregulated market after trading about 8 bolivars per dollar for the past two years, according to the blog Lechuga Verde, or Green Lettuce, which cites traders. Venezuelans turn to the black market when they can’t get access the Sitme or the so-called Cadivi system that sells dollars at 4.3 bolivars for priority imports.

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