Venezuela will boost supplies of dollars to importers as it seeks to alleviate a shortage of goods that is fueling the fastest inflation in the region, central bank director Armando Leon said.
“In the next two months, the supply of goods and services should normalize,” Leon said in a telephone interview from Caracas yesterday. Inflation will slow from May, when consumer prices climbed a record 6.1 percent in the month, he said.
The U.S. currency will be offered through auctions that will begin early in the second half of the year, Leon said. Unlike an earlier system, which was abandoned after one sale in March, small and medium-sized companies as well as individuals will be allowed to enter bids, he said.
Last month’s price increases were fueled by shortages of goods from toilet paper to milk after falling crude production and non-cash oil sales reduced inflows of dollars. Importers, unable to buy dollars through the official system, turned to the black market where they pay about five times more than the official rate. Venezuela devalued the currency by 32 percent in February.
In May and June, the government has focused on alleviating shortages by supplying more dollars to small and medium-sized companies through the official exchange system, Leon said.
“The final alternative system to the official Cadivi system will be expanded and will be made as efficient as possible,” Leon said, adding that the government was working to allow public and private banks and companies to be able to sell dollars on the alternative platform known as Sicad.
Venezuela’s government has not ruled out allowing Sicad to sell bonds in addition to cash, he said.
“The announcement represents a step forward toward a more flexible FX system,” Caracas-based brokerage BancTrust & Co. said in a note to clients today, referring to Leon’s comments.
The central bank’s scarcity index, which tracks staple goods out of stock, fell to 20.6 percent in May from a five-year high of 21.3 percent in April.
President Nicolas Maduro previously stated that the alternative Sicad platform would be re-activated in May. On May 30, Finance Minister Nelson Merentes said that the complementary foreign exchange system would be made more flexible without providing a date for a new auction.
“The main reasons for the slow implementation of new reforms are a lack of leadership, ideological differences within the cabinet, and resistance from groups that benefit from the status quo,” Barclays Plc said in a note to clients today.
Cabinet changes and the political and economic situation in the country are producing a more pragmatic approach from the authorities, the bank said, adding that it expected the Sicad to be re-activated next month.
The South American country is likely to issue $6 billion of dollar debt in September or the fourth quarter of the year, Barclays said.
Venezuela’s GDP growth will be positive in second quarter of the year and “robust” in the fourth quarter as dollar shortages are resolved in South America’s biggest oil exporter, Leon said. The country’s economy expanded below estimates at 0.7 percent in the first three months of the year.
Venezuela’s credit rating was cut to B, five levels below investment grade, by Standard & Poor’s yesterday on concern that divisions within President Nicolas Maduro’s administration may impair the government’s ability to shore up a sputtering economy in a move that Leon said was “unfortunate.”
“They made this decision even as Venezuela has worked to get foreign currency flowing to the productive sector,” Leon said. “We have a position of solid reserves and Venezuela doesn’t have important debt maturities until 2017. Not even the rating agency questions our ability to pay debt.”
The oil sector, which accounts for 96 percent of the country’s dollar earnings, will transfer $40 billion to the central bank in 2013, energy minister Rafael Ramirez said last month. The central bank distributed $59 billion last year, according to its president, Edmee Betancourt.
Venezuelan oil exports fell 5.6 percent in volume and 13 percent in value in the first quarter of 2013 from the previous period, according to central bank.