Venezuelan authorities have decided to create an alternative currency market in an attempt to crack down on a black market where USD is worth around 4 times more than the official rate of the same. The decision was announced by Nicolas Maduro, the interim President of the Latin American country.
Maduro stated that the market is almost ready to function; however, there are some details that the Venezuelan authorities are missing on mechanisms. Maduro however commented that he is hoping that the market will soon be announced and thereby get activated. However, it will only happen after they have incorporated all the economic sectors.
This new system run by state will thereby take the place of a central bank administered market which is known as Sitme. This system will try to complement the current foreign exchange system that is in place, known as Cadivi. This system is expected to provide Venezuelan economy the required amount of foreign currency thereby meeting the real needs of the country.
This new market will be exchanging cash and Dollar denominated bonds, according to an official who has information on this matter. As no final decision has been made as of yet, the officer has asked not be named. The official however affirmed that a decision on this matter will be made before 14th April, when the Presidential election is scheduled to take place.
Before his demise on 5th March, President Hugo Chavez approved a 32% devaluation that played an instrumental role in weakening the currency to 6.3 Bolivars to each USD. The Sitme was also shut down by Chavez, thereby pushing the USD to around 22.5 Bolivars on the black market. The exchange rate details of the black market were published by Liberal Venezolano & Dolar Today, two Venezuelan websites which track the exchange rate on the Venezuelan – Columbian border. According to the Sitme system, the official exchange rate currently is 5.3 Bolivars per USD.
Asdrubal Oliveros, who works as the Director of Ecoanalitica, believes that if the Venezuelan Government is able to set up a parallel currency market that will play an instrumental role in putting down black market Dollar rate.
In 2003, the currency controls were established by the Venezuelan market. 3 years ago, an unregulated market operated by bond brokerages was shut down. This used to supply around $100 million every day to importers.