Tags: Venezuela | devalue | currency | bolivars

Venezuela Devalues Currency for Airlines, Foreign Investment

Wednesday, 22 Jan 2014 02:02 PM

Venezuela devalued its currency for airline tickets and incoming foreign direct investment as it attempts to halt the hemorrhaging of dollars that has pushed international reserves to a 10-year low.

Airlines will be reimbursed for ticket sales at the exchange rate used at weekly auctions, which last sold dollars at 11.36 bolivars, compared with the official rate of 6.3 bolivars, Economy Vice Minister Rafael Ramirez said at a press conference in Caracas today. Venezuelans traveling abroad and foreigners sending remittances home will also buy dollars at the same rate, he said. The bolivar is currently trading at 78 on the black market.

“We don’t have the ability to give preferential rates for travel,” said Ramirez. “We can’t take away dollars from medicine imports to give them to travelers.”

Airlines have an equivalent of $3.3 billion in bolivars in Venezuela, which they can’t expatriate because of exchange controls, according to the International Air Transport Association. Dollar shortages led the country’s largest private food producer, Empresas Polar SA, to warn today that they can’t import more raw materials, equipment and packaging.

The government stopped publishing scarcity statistics in November, after the previous month’s data showed about one in five basic goods was out of stock at any given time.

Venezuela’s benchmark bond due in 2027 reversed earlier declines today after Ramirez’s announcement to rise 0.18 cent to 71.29 cents on the dollar at 12:29 p.m. in New York. The yield on the bond fell four basis points to 14.02 percent.

President Nicolas Maduro said on Jan. 15 food imports and medicine will continue to receive dollars at the preferential rate. Students going abroad and pensioners will also continue paying 6.3 bolivars for the dollar, Ramirez said today.

Increasing the amount of dollars that get exchanged at the higher auction rate amounts to an indirect devaluation in Venezuela, according to banks such as Bank of America Corp. and Barclays Plc.

“I’m not going to fall into a debate whether this is a devaluation or not,” Ramirez said today. “We will not play that game.”

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Venezuela devalued its currency for airline tickets and incoming foreign direct investment as it attempts to halt the hemorrhaging of dollars that has pushed international reserves to a 10-year low.
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2014-02-22
Wednesday, 22 Jan 2014 02:02 PM
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