Maduro approves $900 mln for Venezuela currency auctions

Reuters

By Daniel Wallis and Diego Ore

CARACAS, Oct 10 (Reuters) - Venezuela raised the amount ofdollars to be auctioned by the central bank to local businessesvia a complementary foreign exchange system, and the presidentsaid on Thursday that such sales could now be held every week.

The economy has become a major challenge for PresidentNicolas Maduro, who faces dollars trading on the black marketfor seven times the official rate and annual inflation that hitalmost 50 percent last month.

The central bank says it has allocated a total of $859million to importers over the last seven months through fourauctions of the new foreign exchange mechanism, known as Sicad,which was set up to complement decade-old currency controls.

Maduro said on state TV he had approved $900 million for theauctions, $100 million of which would be available immediately.

"I just approved ... the release of $900 million, as anextra effort, in order to invest all the weeks that come. Fromtoday, they are going to inject no less than $100 million in theSicad system," the president said.

The auctions are aimed largely at local businesses whocomplain that lack of access to dollars has caused shortages ofconsumer goods ranging from flour and car parts to toilet paper.

Trade groups representing business sectors given priority toreceive funds in the Sicad auctions so far say they have no ideawhere most of the $859 million went.

The government says currency controls - a cornerstone ofVenezuelan economic policy since 2003 - have been exploited tothe tune of billions of dollars by shell companies claimingfictitious exports.

Set up by Maduro's predecessor Hugo Chavez to stop capitalflight and inflation, the controls offer big profits for anyonewho can buy dollars at a preferential rate and then resell themfor about seven times more on the black market.

Speaking earlier on Thursday during a televised meeting withthe army's high command, Maduro had appeared suggest the centralbank could auction $900 million a week via Sicad if needed.

"The dollars the fatherland needs to function are completelyguaranteed, without problems, up to Dec. 31," he said, drawingloud applause from his uniformed audience.

"If it goes beyond that, I've decided, perfecting Sicad, tooffer via Sicad an amount of not less than $900 million a weekto complement whatever needs the economy might have."

Market players said that figure sounded high, given that itwas roughly equivalent to the OPEC nation's total oil income. Onthe other hand, $100 million was much less than what was needed.

"You have a market starved for dollars because of the lackof Sitme (a defunct currency auction system) and Sicad supplythis year, and demand for dollars for Christmas imports,Christmas vacations and bonuses," said Russ Dallen, head traderat Venezuela investment bank Caracas Capital Markets.

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