Venezuela move seen as currency devaluation

A Venezuelan government foreign currency auction for local importers has triggered a de facto currency devaluation, the second in less than 50 days, analysts said. Venezuela has had strict currency exchange controls since 2003 in an attempt to halt capital flight. Individuals and businesses could obtained limited amounts of foreign currency through the government at an official rate. But the hunger for dollars and euros persisted, fueling a black market with a much higher exchange rate that by law cannot be published. The government scrapped a program that exchanged currency at a rate of 5.3 bolivars per dollars because officials said it allowed for "speculation," and dollars wound up on the black market. Instead, it launched a new plan known as SICAD through which it auctioned $200 million on Wednesday to a group of chosen companies. The government said that 383 companies participated, but did not name them. Neither did they reveal the sale price of the dollar. Critics say the auction was an attempt by the government of acting President Nicolas Maduro to ease a demand for basic goods -- everything from food to office and hospital supplies -- in this import-dependent country ahead of the April 14 presidential election. "The government did not announce the results of the foreign currency auction because clearly we are facing a new currency devaluation," claimed economist Jose Guerra. He estimated that the dollars went for around 12 bolivars per dollar, much higher than official rate of 6.3 bolivars per dollar. "This is another devaluation," Caracas Chamber of Commerce chief Victor Maldonado told the privately-owned Globovision TV. "This also will mean that the costs and prices of the companies will have to be adjusted." That would lead to higher prices, fueling inflation. Finance Minister Jorge Giordani promised to find a way for individuals to also obtain foreign currency through the SICAD program, which he said offers "transparency" in the exchange rate system. In mid-February, Venezuela devalued the Bolivar by 32 percent against the US dollar. The devaluation made imports more expensive in Venezuela, where inflation at the end of last year stood at 20.1 percent -- the highest in Latin America, based on official data. Investment bank Barclays Capital said in a note that by not announcing the rate the dollars sold at auction, the government was "avoiding the political cost of the announcement of a second devaluation" in less than two months. Econometrica head Angel Garcia Banchs said the SICAD program will be used "to carry out more devaluations throughout the course of the year," which will to finance government expenses and help with US dollar debts run up by the state-run oil giant Petroleos de Venezuela. But Guerra, a former top official at the Central Bank, said SICAD will be insufficient to satisfy the demand of foreign currency in Venezuela.