• Vice president of the economy comments in interview in Caracas
  • New exchange rate system to come into effect on Monday

Venezuela’s government will intervene in a new foreign-exchange market when needed to prevent the world’s fastest inflation from accelerating still further, said Vice President of Economy Miguel Perez Abad.

“In the moment when distortions are generated, we as any state would, will
intervene,” Perez Abad said in an interview in Caracas Thursday. “We don’t want to intervene. The idea is that the exchange rate floats as a function of supply and demand.”

Private companies and individuals will be able to buy dollars on the market, Perez Abad said, adding that he hoped volumes would reach $30 million a day. Dollars will be supplied by the government, Petroleos de Venezuela SA, other state-owned companies and foreign investors.

The new system “will transcend the exchange controls that we have,” said Perez Abad. “It’s a system that procures, captures and administers currency and less like the one we had that controls and assigns them.”

The government will retain a priority exchange rate for essential imports, such as medicine, that will shift to 10 bolivars to the dollar from 6.3. The new “un-anchored” system for non-essential items and services will start at 206 bolivars. Francisco Ghersi, managing director of Knossos Asset Management, said yesterday that investors were in a “see to believe” mode over how free trading would be.

“The state reserves the right to control the growth of a highly vulnerable market,” Perez Abad said, without giving details of how the government would “participate.”

Facing billions of dollars in debt payments and a collapse in the price of oil -- Venezuela’s only significant export -- the cash-strapped nation is looking to revive its moribund economy. After more than a decade of exchange controls, Perez Abad says the new mechanism will supply dollars in a “much more direct manner,” focusing on local producers and social obligations.

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