Venezuela's government and Central Bank on Monday announced new rules for trading in bonds that have become an important outlet for foreign currency dealing.
Venezuelan banks will be able to sell investors' government bonds for dollars with prior approval by the Central Bank, which will have exclusive authority over the market.
Many questions remain about the system, such as what band of trading prices will be permitted by the Central Bank and whether there are enough bonds available to meet demand for dollars.
The government ordered a halt to bond trading three weeks ago as it moved to stem the falling value of the Venezuelan bolivar on the bond market.
President Hugo Chavez's government maintains strict currency controls and sets official exchange rates.
But the market in dollar-denominated bonds that people can buy with bolivars has been a legal route for trading currency — and a crucial source of hard currency for businesses that could not get dollars at the low official rates. Before the government intervened, the bolivar's value had fallen to about half the official rate of 4.30 to the dollar for nonessential goods.
Chavez has blamed speculative trading for eroding the currency's value, and securities regulators have taken over management of 36 brokerage firms while investigating alleged violations of currency controls or other irregularities. At least nine executives of those companies have been arrested.
Under the new trading system, the Central Bank will be able to inspect banks to make sure they are complying with new rules. A band of permitted prices is to be posted on the Central Bank website. It's unclear how often those prices could be adjusted.
Officials have said the bond market could reopen as soon as Tuesday, but it's unclear when banks will be ready to start. Monday was a bank holiday in Venezuela.
Experts have predicted there could be a significant shortage of bonds because of high demand, part of it caused by the long shutdown of trading.
The Caracas-based consulting firm Ecoanalitica has estimated that between $15 billion and $17 billion in bonds will be needed to meet demand.
The government has said banks currently have about $5.5 billion in bonds to feed the new system, but some banking analysts have estimated the country's banks have no more than $2 billion in bonds available.
Economist Orlando Ochoa said the new system seems unsustainable because the demand for dollars will most certainly exceed supply.
Ochoa, a professor at Caracas' Andres Bello Catholic University, said demand for foreign currency has been outstripping supply for some time because the Central Bank has cut back on the amount of dollars provided at the official rate due to declining international reserves and also a decline in oil earnings turned over by the state oil company. Oil accounts for about 95 percent of Venezuela's export earnings.
Ochoa said the new restrictions could boost inflation already hovering at 30 percent, and that combined with Chavez's many nationalizations of private companies, such economic policies could deepen Venezuela's recession. The economy declined 5.8 percent in the first quarter.
Venezuela imports much of its consumer goods as well as parts and machinery for its factories, and between 30 percent and 40 percent of imports are purchased through trading in government bonds. Some business leaders have warned that many companies are close to running out of inventory because they haven't been able to legally buy imports for about three weeks.
The government's currency agency does supply dollars to importers for goods deemed priority items, but many businesses turned to the bond market when unable to obtain officials' approval of their requests for funds.
It is unclear how many Venezuelans have used black-market trading to obtain foreign currency during the past three weeks. Some websites and posts on Twitter refer to rates of more than 9 bolivars to the dollar, less than half the official rate.
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