Venezuelan Government Announces New Currency Exchange System
Today members of the government held a press conference to inform the public about the new system for buying foreign currency. Called the Complimentary System of Foreign Currency Acquirement (Sicad), interim president Nicolas Maduro said it aims to “overcome the parallel market”.
Merida, March 19th 2013 (Venezuelanalysis.com) – Today members of the government held a press conference to inform the public about the new system for buying foreign currency. Called the Complimentary System of Foreign Currency Acquirement (Sicad), interim president Nicolas Maduro said it aims to “overcome the parallel market”.
The Sicad system will be parallel to the Foreign Exchange Administration Commission (Cadivi) system, which supplies companies, organisations, and individuals with the dollar at the official rate, and will replace the old Transaction System for Foreign Currency Denominated Securities (Sitme).
Last month the government devalued the bolivar’s fixed exchange rate to the dollar from 4.3 to 6.3. The Sitme system was changing dollars for bolivars for importers and travellers at a maximum rate of 5.3 bolivars/ dollar, while this past month the bolivar has been trading at 23 bolivars/dollar on the black market.
Minister for finances, Jorge Giordani explained that the Sicad will function like a public “bidding” system for private companies who need to import. A Superior Organ for the Optimisation of the Exchange System will decide which companies are authorised to buy dollars and announce how much money is available.
It, together with the Central Bank, will then receive offers, and companies should also supply receipts proving the cost of the machinery or materials that they need to purchase. Companies will request foreign currency through their banks or other financial institutions, which will then send on the information to the Central Bank.
The Central Bank will pay the overseas providers directly. This means that the companies in Venezuela who are authorised to receive the dollars will never directly handle that money, making it difficult for them to spend less than they suggested they needed, and sell the remaining amount of dollars on the parallel market for much higher than they bought them for.
The finance minister said that the Superior Organ for the Optimisation of the Exchange System will carry out “strict control” in order to verify that companies import the goods and products they said they would with the dollars assigned to them.
Sicad dollars will only go to “productive activity” or socially beneficially goods, the president of the Central Bank of Venezuela, Nelson Merentes said.
According to Giordani the system is a variation of one created by the Canadian economist and Nobel prize winner, William Vickrey, and will guarantee “transparency in the process of assigning foreign currency”.
Maduro blamed the “corrupt rightwing and the parasitic bourgeoisie” for being behind the parallel market, and for “betting on” the destabilisation of the country’s economy.
He also said Venezuela “has enough dollars for Cadivi to work well”. The president of Petroleos de Venezuela (PDVSA), Rafael Ramirez, said that the state owned oil company and Venezuela’s main generator of dollars, will sell US$ 41.479 billion to the Central Bank this year.
“These dollars aren’t for the parallel market, but rather for the real economy, for exporting, for the needs of the population and for their social benefit,” said Merentes.
Today is a bank holiday in Venezuela. Sicad will begin functioning as of next Monday.
Further economic announcements
Yesterday Maduro also announced that the government had approved US $1 billion for the Bicentenary Fund Alba-Mercosur, in order to further “invest in technology, to increase our productive capacity” and to increase Venezuela’s exports. A proportion of this money will go towards the Productive Venezuela plan.
“The new ethic should be to produce in order to serve human beings, through a respect for new forms of production,” Maduro said. The Productive Venezuela plan, “aims to generate new channels of distribution that break away from the speculative mechanisms of capital,” he said.
The government also approved Bs 35 million in loans for national producers.