Venezuela to Ease Restrictions in Currency Market

August 06, 2010, 4:13 PM EDT

(Adds plans for liquor companies in sixth paragraph.)

Aug. 6 (Bloomberg) -- Venezuela will ease some restrictions to allow companies to access the currency market after President Hugo Chavez banned unregulated trades, Armando Leon, a central bank director, said today in an interview.

Companies that aren’t authorized to buy dollars at official exchange rates will be allowed to use the central bank’s market, known as Sitme, for such trades, Leon said. The goal is to make foreign exchange transactions more “fluid,” he said. The bank also plans to periodically allocate dollars to companies facing purchase quotas, he said.

“In one or two months the market should be running at the velocity of a cruise ship,” Leon said in an interview in Caracas. “Sitme will have three sources. Besides bonds from the financial sector, oil and mining companies with dollars are selling to obtain bolivars, and bonds from the coming issue will be used to restock the market.”

Chavez closed the unregulated market in May and made the central bank the only entity authorized to buy and sell dollar- denominated bonds. Companies used the unregulated market to obtain currency at more than two times the official rate when they didn’t get government authorization.

New Rules

The Foreign Exchange Board, known as Cadivi, currently approves currency purchases made by companies. Cadivi meets 80 percent of the country’s importing needs and has boosted daily dollar sales to $140 million in July from $100 million in April, Leon said.

The Central Bank will facilitate rules for companies importing liquor and car parts to register with Cadivi, allowing them to buy dollars through Sitme. The bank will also directly sell dollars to large corporations in the telecommunications, textile and chemical industries, Leon said.

The Sitme market will be funded through the sale of bonds from private banks, dollars from foreign companies and government debt issues, he said. The bank sold more than $1 billion through the market since it opened on June 9, at an average exchange rate of 5.3 bolivars per dollar.

There are no plans to raise the purchase limits of $50,000 a day and $350,000 a month that companies now face, Leon said.

Chavez banned brokerages from participating in the currency market and closed more than 40 firms, accusing them of money laundering, setting artificial exchange rates and capital flight. Companies used the brokerages to skirt currency controls, paying as much as 8.2 bolivars per dollar in the unregulated market.

“This is not the unregulated market,” he said of a plan to allocate dollars to companies. “That market is history.”

--Editors: Alan Mirabella

To contact the reporter on this story: Corina Rodriguez Pons in Caracas at crpons@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net