BOGOTA, Colombia -- Venezuela on Wednesday announced it’s overhauling its foreign-currency system as it hopes to break a cycle of scarcity and inflation that has pummeled the Andean nation.
Among the changes, Oil Minister Rafael Ramirez said the government will further restrict access to “preferential” dollars that the administration doles out at 6.3 bolivares per greenback. Among those excluded from the list will be Venezuelans traveling abroad and airline companies.
Instead, travelers and others will have to buy their dollars on a parallel auction market, called SICAD, where the bolivar goes for about 11.30 to the dollar. The government will also expand the amount of dollars available at the weekly auction from $100 million to $220 million, Ramirez said.
During a lengthy news conference, Ramirez said the changes are needed to bring the economy into “equilibrium” and to keep fighting an “economic war” waged by the administration’s foes.
While economists have said a currency devaluation was necessary, such moves are unpopular, as they sap consumers’ purchasing power.
Opposition Deputy Julio Borges said the announcement effectively means that the bolivar has gone from 4.30 to the dollar last year to 11.30 — the current SICAD auction rate.
“As always, this devaluation will bring more inflation and more scarcity,” he wrote on Twitter. Inflation hit 56 percent last year — the hemisphere’s highest.
Ramirez tried to downplay the effects of the announcement.
“More than 80 percent of the goods and services that the country needs enjoy the preferential rate,” he said. “But there are people who are gaming the system.”
He said the government needed to proritize the use of its dollars.
“It’s a choice between [importing] medicine or [giving] money to travelers,” he said.
The country will also implement a currency-band system — book-ended by the official rate and the SICAD rate, Ramirez said. In other countries with that system, the currency is allowed to fluctuate within the extremes of the band. But it’s unclear how it will be implemented in Venezuela.
Venezuela is rich in oil but is poor in almost everything else and is forced to import about 70 percent of its goods. However, there are not enough dollars to go around.
Businesses complain they’re being starved of the greenbacks they need to keep running.
Instead, many turn to the illegal black market, where dollars fetch almost 10 times the legal or preferential rate.
That dollar deficit has led to shortages of everything from car parts to toilet paper. More recently, newspapers have said they might have to quit printing unless they get the funds to import paper.
On Wednesday, Empresas Polar, the country’s largest food company, said the government owed it $463 million, which it needs to pay foreign creditors. It also said the government is taking, on average, 230 days to turn over the dollars.
Without “urgent action” on the government’s part, the company might not be able to make it’s next round of imports, Polar said in a statement.