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Posts Tagged ‘swap market’

Leaders of the Central Bank of Venezuela and the Ministry of Planning and Finance are concerned about the difficulties encountered by the installation of the band system to carry out exchange operations, said sources close to the central bank.

The total amount of the issue, the main aim was to lower the dollar side, was 50 million dollars. However, to be prohibited transactions in the swap market, the Central Bank and the Ministry of Planning and Finance study a way to fulfill this commitment and to prevent the nation lose confidence for future emissions.

The Government did not take into account that freezing the stock market could have serious implications even for its debt profile because, for example, if you do not pay the instrument issued by the Central Bank would create a precedent very difficult to overcome, said a treasurer consulted.
There is still no certainty about the increase in the quota of foreign exchange for travelers.
“It has to do with the trust that exists when you buy a part of the Republic, if not canceled in time will be uphill achieve in the future that investors are interested in buying bonds,” the treasurer. .

Therefore, a statement caught the attention of the director of the BCV, Armando Leon, which confirmed that the market for buying and selling foreign currency bonds to restart in the coming days.

“Next week should be completed and all operational and functional part of the legal foundation that will carry the system, so we should be operating,” he added.

The government suspended on May 18 called “parallel market exchange or market” which until then was in charge of brokerage firms that negotiated the purchase and sale of bonds or securities, by the allegations of “criminal offenses” in “fixation speculative” price for the transfer of the papers, said Leon Glob vision.

The president of the National Securities Commission, Tomas Sanchez, said: “We have strong presumptions that these institutions are involved in crimes exchange with the simulation of operations,” he said.

Attempts were made to verify with the authorities of the Central Bank if you really consider increasing the quota of foreign exchange for travelers, as the holder of Cadaver said Manuel Barrios, earlier this week, but none of the directors wanted to refer to the information.

Venezuela’s government imposed a drastic currency market tourniquet to stop the parallel exchange rate, but in a country, heavily dependent on imports could measure economy already infected gangrene by recession, inflation and shortages.

The so-called swap market, where bonds be exchanged for dollars in brokerage firms and brokerage houses, was closed on 17 and be replaced by a banded system established and administered by the Central Bank of Venezuela (BCV), which will begin operating in the first or second week of June.

“It is imposing a police out an economic problem that does not solve anything,” said economist Edward Semite IPS, commenting on the raid and closing of two dozen securities firms under the general accusation of speculation and money laundering by leftist President Hugo Chavez.

While the swap market is closed, the demand for dollars will be meager satisfied only by the Administrative Commission of Foreign Exchange (Cadaver), which grants U.S. currency in the regulated market and that in 2009 only covered 65 percent of the 38.4 thousand million dollars of imports . Alternatively, the black market.

In Venezuela, governed since 2003, a tight control of changes, which in January 2009 when all information was tightened on the parallel market became a criminal offense. That year, the economy contracted 3.3 percent of gross domestic product (GDP), but this did not dampen the demand for dollars.

The problem, said Semite, university professor of the traditional left who supported the government until 2007 that the administration has no foreign exchange earnings or reserves to meet their own obligations in 2010 and, much less to meet the demand of companies and individuals.

The government, he explained, must pay this year about 18,000 million dollars of new debt service of a short-term, arms purchases close to 30,000 million dollars, accrued liabilities with outside contractors to perform great deeds, or their new oil associations, among other items.

Given that reality, Chavez and his cabinet hardened further Exchange Crimes Act, which now puts the BCV as the exclusive agent of the parallel market and increases fines and prison sentences for those who operate illegally or who report on other contributions, including Internet.