Venezuela: Controlled Currency Devaluation on the Way

EspañolOn Monday, December 16, Venezuela’s vice president for the economic area announced that the auction-based currency exchange system (SICAD) — which trades Bolivares Fuertes at approximately half the value of the official rate — will stop being an alternative or temporary mechanism and become a permanent one and the reference rate. The central government first introduced SICAD earlier this year as a Vickrey auction system (a “democratic” determination of price), and as a substitute for the previous system available to businesses.

Ramírez also anticipates an eventual and complete substitution of the current foreign currency acquisition open to individuals (CADIVI) by SICAD. Even though the dollar rate fixed by it is currently at Bf. 6,3, the established rate at SICAD auctions has been considerably weaker and unpredictable.

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SICAD will not only be a permanent mechanism, it will provide the reference rate for gold purchase operations, as well as dollar income from the tourist and oil sectors. In addition, Ramírez suggested a change of the specific criteria for currency acquisition, which will be announced in 2014.

Venezuela has maintained a controlled system of currency purchases and sales since 2003.

Source: El Mundo.