Venezuela will increase the sale of dollars by starting weekly auctions in a bid to arrest the decline of the bolivar on the black market and boost imports amid shortages of everything from toilet paper to chicken.
South America’s biggest oil exporter will sell $900 million in the coming weeks through an auction system that charges buyers more than the official exchange rate, President Nicolas Maduro said on state television yesterday. Venezuela has sold $761 million through the auction system since July.
Restricted dollar supplies have crippled imports in a country that buys 70 percent of its goods from abroad. The shortages have pushed inflation in the past twelve months to almost 50 percent and caused the bolivar to lose 60 percent of its value against the dollar in the black market this year.
The dollars will “complement any need the economy may have” through the end of the year, Maduro said, adding that he is revising the entire system of foreign exchange controls. The government will auction at least $100 million a week, Maduro said, clarifying his earlier remarks that the government would sell $900 million a week.
“$100 million a week is nothing,” Russ Dallen, head bond trader at Caracas Capital Markets in Miami, said yesterday in an e-mailed note to clients referring to previous supplemental currency systems closed by the government that sold as much as $100 million a day.
Venezuela will announce more economic decisions in coming days to guarantee the supply of goods through the end of 2013, Maduro said.
Venezuela’s international reserves have dropped to $22.1 billion, the lowest level in almost nine years, according to data compiled by Bloomberg.
“I don’t think this will increase the offer of dollars,” Barclays Plc analyst Alejandro Grisanti said yesterday by phone from New York. “Instead, they’ll stop delivering one way to assign through Sicad at a higher price than the official dollar.”
Maduro said the government provides 95 percent of the dollars importers need at the official rate of 6.3 bolivars. The remaining five percent is supplied through auctions in the so-called Sicad system at an undisclosed rate, he said.
“The decision has a positive fiscal impact, but it will not dampen the demand for foreign currency, nor lower the price of the dollar on the black market,” Asdrubal Oliveros, director of Caracas-based consultancy Ecoanalitica, said in a phone interview.
Maduro requested special powers from the National Assembly Oct. 8 to fight inflation, shortages and corruption. In a speech to the assembly, the former bus driver asked lawmakers for the right to govern by decree for 12 months, while accusing businesses of “waging economic war” by hoarding goods and speculating on foreign exchange controls.
“Since the day of my inauguration, the parasitic bourgeoisie has not let up for one second in its war to destroy me, to fill the people with hate towards me, as they did with comandante Chavez, sabotaging the economy, agitating the country and filling it with violence,” Maduro said.
Maduro may use the decree powers to enact new foreign exchange laws, Caracas-based news website Noticias24 reported yesterday, citing National Assembly finance committee president Ricardo Sanguino.
Vice President Jorge Arreaza said Oct. 9 that the official exchange system known as Cadivi needed to be restructured, and Venezuela National Assembly president Diosdado Cabello said the same day that capitalism had damaged the country’s currency controls.
“If Cadivi has been damaged, the system must be changed,” Cabello said, adding that the official rate of 6.3 bolivars per dollar would only be used for products of “primordial” importance. “December will come and businesses will start to ask for dollars at 6.3 to import whiskey. That can’t be the priority for this government.”
One dollar currently buys about 45 bolivars on the black market, according to dolartoday.com, a website that tracks the value at the Colombian border.
“This is clearly too little, too late and obviously meant as a campaign gambit for the December municipal elections,” Dallen said, referring to the expanded dollar auctions.
Annual inflation in Venezuela quickened to 49.4 percent in September, the highest rate among the 112 economies tracked by Bloomberg. The central bank’s scarcity index rose to 21.2 percent, meaning that one of every five staple goods were out of stock last month.