Amid great confusion, the suspended Venezuelan forex market will reopen today, under far greater control from the central bank. Quite how the trading band will be determined and defended is not known.

The unofficial “parallel” forex market was suspended on May 19, with authorities blaming speculators and enemies of Hugo Chavez for the depreciating bolivar and rising inflation. This has left importers struggling for a fortnight. As the FT’s Benedict Mander put it: “One is left wondering why they couldn’t have decided how the new system was going to work before casting out the old.”

The market is expected to work as follows: Read more

Venezuela's bolivar fuerte notesBy Benedict Mander

They said it would take Venezuela two weeks to come up with the new currency trading rules for its multi-tiered exchange rate. Instead it took three – not bad for Hugo Chávez’s Bolivarian revolution, whose track record on following through with announcements on time is shaky.

But, then again, the new rules are incomplete.

Most important, they don’t explain how the central bank will determine the value of the bolívar against the dollar in its “free market”, alongside Venezuela’s two other fixed exchange rates.

Nor is it clear when trading itself on the Bloomberg E-bond platform will actually begin. Monday is a bank holiday in Venezuela. Read more

Simone Baribeau

Some Latin American countries have made some less-than-orthodox decisions during the crisis. What does the IMF have to say about them? For the most part, Nicolás Eyzaguirre, the IMF’s director of the Western Hemisphere department, was, if not supportive, not critical either.

Asked at a presser during the IMF spring meetings about Argentina’s decision to pay back its debt using central bank reserves (a saga which felled one resistant central bank governor), Mr Eyzaguirre responded: “Each country decides on its own sovereignty how it’s going to decide with debt management, so we don’t have an opinion on that.”

He was also emphatic that the Fund had not objected to Brazil’s decision to tax capital inflows. “Our first reaction Read more

New rules for Venezuela’s central bank will allow government use of ‘excess’ reserves, Bank financing of government-led projects, and a permanent seat on the Bank board for the Finance Minister.

From Bloomberg:

Venezuela’s National Assembly approved changes in the rules governing the central bank to increase the government’s influence on the institution and to allow it to finance state projects.

 Read more

Simone Baribeau

No relationship other than that they both reported February consumer prices today and in both cases, government price controls affected inflation.

Inflation in Venezuela subsided in February, falling to 1.6 per cent, its lowest level in 11 months. That is, of course, the monthly rise, annualised inflation rose some 24.7 per cent. The lower price increases were due to smaller increases in the cost of food, communication, education and alcohol and tobacco. Read more

Venezuela is an unlikely taker for the IMF’s planned bullion sale.

The country plans to invest about $300m importing equipment to mine 36 tonnes per year. Tailings at a number of old mines show reserves of around 170 tonnes in the southern state of Bolivar. Read more

Venezuela could struggle to achieve its target of 4.3 bolivars to the dollar, having executed part of its plan to transfer funds from the central bank to the country’s development fund.

$3bn out of a planned $7bn has been transferred from the Venezuelan central bank to the country’s off-budget development fund, Fonden. The remaining $4bn may be transferred next month. Read more

Simone Baribeau

The mixed reaction to Venezuela’s currency devaluation continues, with investors and ratings agencies cheering the move, and Venezuelans concerned the move will exacerbate already steep inflation.

But one move likely to cheer Venezuelans – at least those with enough dough to buy bucks – Venezuela today started issuing dollar denominated bonds at a rate of 4.3 bolivars, the new exchange rate for non-essentials. Read more

Simone Baribeau

Standard & Poor’s upgraded its outlook on Venezuela to stable from poor in a show of support for the country’s recent currency devaluation.

“We revised the outlook to stable because we believe that the latest government devaluation of the currency, combined with prospects for stable oil revenues, will reduce Venezuela’s fiscal pressures,” said Roberto Sifon Arevalo, a credit analyst at S&P. Read more

Long queues are reported at shops in Caracas, following the surprise devaluation of the bolivar on Friday.

President Hugo Chávez announced a new multi-tiered exchange rate regime. The official value of the dollar, which has remained at 2.15 bolivars since March 2005, will now be fixed at 2.6 bolivars, a rate reserved for the import of essential goods such as food and medicine. Read more