LatinNews Daily Report - 10 March 2014

ECONOMY | Sicad 2 finally launches. Today (10 March) the new US dollar allocation system, Sistema Complementario de Administración de Divisas II (Sicad 2), launches in Venezuela, a fortnight after it was meant to begin operations. The Sicad 2, officially the third such foreign exchange system, effectively re-opens the ‘permuta’, the foreign exchange swap mechanism shut down in 2010 by the late former president, Hugo Chávez (1999-2013). According to the vice-president for economic affairs, Rafael Ramírez, swaps will be held daily, in a combination of cash and bonds, at a fluctuating rate. This will amount to a sort of controlled float, analysts point out. The Bolivar Fuerte, which is fixed at BF6.3/US$1 for imports of designated essential goods (largely food and medicines) and is offered at about BF11.8/US$1 for all other imports, oil investments and remittances under the central bank-administered Sicad 1, is expected to soften to between BF25/US$1 and BF40/US$1 under the Sicad 2. Re-authorisation of the permuta should help soften the black market, although the premium between the official and parallel rate is now such that it probably won’t make a huge difference immediately. According to websites that publish the (illegal) parallel rate, it is currently trading at about BF80/US$1 on the Colombian border. Ramírez on 7 March announced US$5.0bn in new financing from China and US$2.0bn from Russia. International reserves held at the central bank were US$21.6bn as of 7 March, down from US$26.9bn a year ago. The Venezuelan oil basket continues to trade down, averaging US$96.6/barrel (/b) to date in 2014, down from US$99.5/b in 2013. Separately, in response to a request by the main business chamber, Fedecámaras, Ramírez reported that the former official foreign exchange agency, Cadivi, assigned US$51.5bn to 5,561 companies between 2011 and 2013, of which 599 companies received US$41.2bn, i.e. 11% of the companies took 80% of the funds.

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