The Finance Ministry of Venezuela has sold around $200 million on a new secondary exchange system without giving any sort of information on the exchange rate for the winning bids. With the auction, dollars were awarded to 383 different companies, according to a statement published in the official website of the ministry. Incidentally, companies which are registered with the Cadivi currency only could have participated in the auction that was held on today.
Nicolas Maduro, the acting President of Venezuela introduced a new foreign exchange mechanism for the country before the 14th April Presidential election. This was done in a bid to halt the decline of Bolivar on the black market. Apart from that, it is also expected that this move will reduce shortages of goods in the local stores. Since 8th February, Bolivar has actually declined by 19% in the black market and is currently priced at 23 Bolivars per USD. On 8th February, Bolivar was devalued by 32% on the Cadivi system. Incidentally, Bolivar is the major currency of Venezuela.
According to the Analyst of JPMorgan Chase & Co., Benjamin Ramsey, the only reason for not disclosing the foreign exchange rate was not to concede a de facto second devaluation, when the election campaign is going on. Ramsey predicted the exchange rate to be above the official rate 6.3, as he believes; otherwise, it would have been disclosed officially.
The Finance Ministry is yet to clear that how many times the Dollar auctions will be held. The date for the next sale is yet to be clarified either. This new system is expected to prioritize the supply of Dollars for importing food, healthcare equipment, medicine and industrial equipment, as far as the statement made by the Finance Minister Jorge Giordani on 19th March. Incidentally, Maduro earlier stated that Venezuelan Government may introduce adjustments to the system allowing even individuals to take part in the auction.
In last February, annual inflation of Venezuela rose to 22.8%, marking the fastest pace in 10 months prior to that. The scarcity index of the Central Bank has also increased to a record figure of 20.4% in last January as well. Incidentally, scarcity index measures the amount of goods which are out of stock in the market. The yield on country’s 9.25% Dollar bonds due in 2027 increased by 14 basis points to 9.57%.