The Venezuelan government is to pump an extra US$900 million into the economy through an auction system in order to satisfy foreign currency demand and reduce the value of the black market dollar.
The auctions will take place every Wednesday through the Complimentary System of Foreign Currency Acquirement (Sicad), with US$100 million to be auctioned every week for the next nine weeks.
Currency controls have been in place since 2003 to prevent capital flight, with the state allocating dollar quotas to citizens and businesses through official exchange body Cadivi.
The pumping of extra dollars into the economy seeks to reduce the value of the dollar on the black market, where it has ballooned to seven times the value of the government-set rate.
The measure is also intended to ensure that sufficient imports are made to tackle shortages in the economy and the resulting high inflation experienced this year. The annual inflation rate is currently 49.4%.
Vice President for the Economic Area Rafael Ramirez said that the new dollar auctions will be “regular” and permanent”.
“It will be a regular system. The processes of prior notice, auction and currency allocation will be undertaken and completed in [the space of] a week, and each Monday a new auction will be called,” he informed press on Friday.
The Sicad auctions allow the government to sell dollars above the official rate of 6.3 Bolivars per US dollar, but well below the black market rate. In the first auction this Wednesday priority will be given to businesses importing goods related to the Christmas season, as well as citizens with study or healthcare costs abroad.
Venezuela’s main source of foreign currency earning is oil sales. According to Ramirez, this year state oil company PDVSA will have issued US $47.3 billion of foreign currency for distribution to the Venezuelan economy, 2.6% more than last year, when there were fewer shortages.
Officials argue that economic problems this year such as high inflation and scarcity in some basic goods and foodstuffs are due to an “economic war” waged by economic actors opposed to the government of President Nicolas Maduro.
“We’re facing a severe economic war, a perturbation by internal and external economic agents. We have the determination to defeat the economic war whatever it takes, and we’ll be victorious,” said Ramirez last week.
Meanwhile critics blame current economic problems on government mismanagement and policies such as currency and price controls. They claim that the new dollar auctions are not enough to meet the rising demand for foreign currency, and so will be unable to achieve the hoped for effect.
“There is repressed demand due to a dollar drought that has lasted for some time. I don’t think this level of supply in the Sicad will achieve the lowering of the dollar on the black market,” said Asdrubal Oliveros, director of Caracas-based consulting firm Ecoanalitica.
The Venezuelan government is also discussing wider reforms to currency controls to ensure the adequate distribution of dollars in the economy while avoiding wastage in scams and “unnecessary” imports.
“We will optimise the use of foreign currency because it belongs to the people. It’s not for acquiring things that aren’t a priority for our needs,” said Ramirez.
According to the vice president for the economic area, other key areas the government has been focusing its planning on are shortages, inflation, and ensuring continued economic growth in the coming period.