New Currency Exchange Program Aims to Diversify Venezuelan Economy

Caracas, August 19 2013 (Venezuelanalysis.com) – In the second of three new programs instituted to aid foreign currency exchange, the Commission of the Administration for Currency Exchange (Cadivi) will implement the plan “Productive Cadivi” later this week, Cadivi President Jose Khan announced in a Council of Ministers meeting over the weekend.

The plan focuses on the productive sector by attending to and consulting with businesses to facilitate foreign exchange acquisition, with a goal of lessening the current gap between the official and black market exchange rate, currently at 6.3 bolivars and 37 bolivars to the US dollar, respectively.

Khan intends to use the program to identify businesses with a potential for imports and diversification of the economy, which currently depends on oil for 95% of its export earnings and 12% of GDP, according to World Factbook.

“Cadivi has to reconsider its role and become an active system that helps the economy,” he said. “We will carry out a report to collect and detail which companies or smaller businesses have the potential for exports, and, supported with a small investment, would permit the diversification of the economy so that we may have additional foreign exchange than through oil.”

Khan also explained the implementation of Cadivi’s third program, “Secure Cadivi,” to address the illegal use of currency, indicating that 36 citizens had been detained after conducting “flagrantly illegal” transactions.

“When [late] President [Hugo] Chavez created Cadivi in 2003, he did it with the primary objective of meeting the needs of the people, which are now served in two ways: a direct route, which comes from working with the individual, and through working with people in a legal capacity, honest businessmen to whom Cadivi grants currency with the objective that they bring goods to serve the country,” Khan said.

At the meeting, Venezuelan President Nicolas Maduro announced the creation of a new “exchange system” aimed at creating stability and attracting more foreign investment.

Though he did not fully elaborate on the system, he explained the need to strengthen Venezuela’s capital account through the entry of foreign currencies and the optimization of those currencies granted to the productive sector. He emphasized that this would be achieved with currency controls.