Venezuela to hold weekly $100 mln currency auctions

Reuters

By Eyanir Chinea and Daniel Wallis

CARACAS, Oct 11 (Reuters) - Venezuela will auction $100million at weekly central bank auctions through a complementaryforeign exchange system aimed at easing access to hard currencyfor local businesses, a top government official said on Friday.

The economy is a challenge for the government of PresidentNicolas Maduro, with importers complaining they are starved ofgreenbacks, while the annual inflation rate hit almost 50percent last month.

In a bid to resolve politically embarrassing shortages ofconsumer goods such as car parts and toilet paper, thegovernment will provide the auction system, known as Sicad, withmore dollars and will hold the sales more frequently.

"Starting next Wednesday ... each week we're going toauction $100 million via Sicad," the petroleum Minister and vicepresident for the economy, Rafael Ramirez, told a newsconference.

"We have the resources to support this offensive."

The central bank says that over the last seven months it hasallocated a total of $859 million to importers through fourauctions of the Sicad mechanism, which was set up to complementdecade-old currency controls.

But trade groups representing business sectors givenpriority to receive funds from those auctions say they have noidea where most of the $859 million went.

President Maduro said late on Thursday he had approved afurther $900 million to be auctioned via Sicad.

Critics of the government say the more-frequent auctionswere introduced in the hope of getting goods back into shopsahead of mayoral elections scheduled for December 8, then thebusy Christmas season following soon after.

The opposition accuses Maduro of ruining the country byfailing to stamp out corruption and by sticking to the socialistpolicies of his mentor, the late Hugo Chavez.

The government accuses its foes of deliberately "sabotaging"the economy as part of what Maduro says is a U.S.-backed"economic war" aimed at forcing him from power.

Ramirez said officials would keep studying how to improvethe work of the state currency board Cadivi, which providesdollars at the official exchange rate of 6.3 bolivars forpriority goods such as food and medicine.

"We'll keep revising, optimizing and improving Cadivi'sprocesses to continue attending to all our fundamental andproductive needs," the minister said.

"And we'll keep releasing dollars through Sicad for otherneeds, which don't have anything to do with food, health orother priority areas."

The government says the country's currency controls, acornerstone of Venezuelan economic policy since 2003, have beenexploited to the tune of billions of dollars by shell companiesclaiming fictitious exports.

Set up by Chavez to stop capital flight and inflation, thecontrols offer big profits for anyone who can buy dollars at apreferential rate and then resell them for about seven timesmore on the black, or "parallel", market.

"We are going to destroy the parallel market. Its days arenumbered," Ramirez said.

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