Venezuela to Implement New Foreign Exchange System on Thursday
- Exchange rate for non-essential imports to start at 206
- PDVSA will be allowed to sell dollars in the new market
Venezuela will move to a floating exchange rate for non-essential imports on Thursday and allow the state-owned oil company to sell dollars into the new market, said, vice president for the economy.
The Dicom exchange rate will begin at 206 bolivars to the dollar and then “float” to meet market needs, Perez Abad told reporters Wednesday at the central bank. The primary exchange rate of 10 to the dollar will apply to essential imports, such as medicines.
By allowing, which accounts for more than 95 percent of the country’s exports, to sell dollars at the new exchange rate, the government will boost the liquidity of the system and lift revenue from oil sales in the local currency. In 2015, PDSVA’s implicit exchange rate was 66 bolivars to the dollar, according to a debt statement filed earlier this year. Many investors remain skeptical that the will push through with the effective devaluation as it struggles to control inflation.
“Investors are mostly in a ‘see to believe’ mode right now,” said, managing director of Knossos Asset Management. “Supply from PDVSA and other oil producers would give a little more liquidity to that market.”
PDVSA needs the additional funds following thein oil prices last year. The company owes almost $5.7 billion in principal and interest on bonds this year.
“Because of the cash-flow issues within PDVSA, a large devaluation certainly helps,” said Luisa Palacios, head of Latin American research at Medley global Advisors LLC. “Does it seal the deal? I don’t think so but it helps market sentiment.”
PDVSA’s 8.5 percent due 2017 jumped 2.1 cents to 53.46 cents on the dollar at 2:10 p.m. in New York, according to data compiled by Bloomberg.
--With assistance from.