Archive for June 7th, 2010

“Rules” for the new Foreign Exchange System at the Venezuelan Central Bank, or are they?

June 7, 2010

Today’s headlines said something like: “Rules for new foreign exchange market published”. Everyone gets excited, as El Nacional says the Minister of Finance wants the new exchange rate capped at Bs. 6 per US$. However, no such rules were published.

What was published was Foreign Exchange Agreement #18 (Yes, 18 times the relationship between the Central Bank and the Government has been changed on foreign exchange markets) and the regulations, but you will find little telling you how to do it, what you can do, when you can do it or where you can do it, which is what people want to know.

But rules? Nothing of the sort, some general principles that will guide the new exchange market mechanism, but if you wanted to read them to see how you go about getting cheap dollars (Venezuela’s most important export!), you are out of luck.

Because the “rules” defined by the 18th. Foreign Exchange agreement and the associated regulations are:

–Only banks, savings banks and exchange houses will be able to participate in the market to sell and buy bonds via the Venezuelan Central Bank.

-They will charge a commission which will have to be published.

-Exchange houses will only be able to deal with cash of Colombian Pesos or Brazilian Reals.

-Banks can send money transfers

-Banks will have to provide all information requested from them by the Central Bank.

-You can only trade bonds issued by the Republic and related entities via the Central Bank and only banks and similar financial institutions can do it (You knew that!)

-The Central Bank will say which bonds can be used.

-If you don’t comply with any of the above you will be punished and you can be inspected by the Central Bank, as often, as necessary and as in detail as the Central Bank desires.

There you have it. You have read my post, but learned absolutely nothing about how to to get a dollar out of the Central Bank. You know you will have to go to a bank, that’s about it!

Thus, the market that was going to start last week. (Chavez said it will be hours or days before it starts, well it maybe a group of days, called a week). My bet is, this will not start this week either, so that Venezuela would have saved one month of imports, which maybe Minister Giordani believes means that the money will be saved and people can go hungry, diaper-less, cellphone-less, or whatever for a full month without any significant impact.

Jeez, I wish , I would charge a dollar for each person that reads a post…I would get more foreign currency that way that I am likely to get out of the new system…even if it is at Bs. 6 per $, ta’ barato dame dos (It’s cheap, gimme two*)

*Famous phrase from the 70’s when Venezuelans would go to Aruba, Miami and Curacao and when told the price would answer that way)