Venezuela to give companies 2.6 exchange rate
By Steven Bodzin and Corina Rodriguez Pons
CARACAS, Venezuela (Bloomberg) — Venezuela will allow foreign companies to exchange dollars for 2.6 bolivars apiece, lower than the 4.3-bolivar rate applied for non-essential items, a former planning minister said.
“Days ago, it was announced that outstanding debts would be recognized at 2.6 bolivars,” said Tomas Socias, who now works as a consultant for foreign companies in Venezuela. The government “still hasn’t started to distribute approved cash,” he said.
Venezuela devalued its currency a month ago, from 2.15 to a dual rate of 2.6 and 4.3 bolivars to the dollar, and companies have been waiting for word on what rate will apply to them. Venezuela gives the 2.6 exchange rate to importers of goods the government considers essential, such as food and medicine, while the 4.3 rate applies to most products.
Companies including Telefonica SA, Goodyear Tire & Rubber Corp. and Colgate-Palmolive Co. have waited as long as two years to exchange local currency for dollars or euros as Venezuela has delayed exchanges, which under local rules must go through the central bank. The 2.6 rate will apply to funds the companies requested before Jan. 8, Socias said. It’s still unknown what rate will apply for requests made since then, he said.
“The problem is that the Central Bank of Venezuela isn’t sending dollars” to the foreign exchange office, known as Cadivi, Socias said. Socias said he had spoken with company and government officials who helped him interpret a Jan. 19 statement from the Central Bank.
Central Bank President Nelson Merentes, the bank’s only authorized spokesman, didn’t return a call seeking comment.
Delays in dollar repatriation began in 2008 when oil prices fell 78 percent from a record in July of that year to a five- year low of $32.40 a barrel in December.
When companies can’t get access through Cadivi, they turn to the unregulated parallel market and pay more bolivars per dollar. The bolivar was unchanged at 6.4 per dollar at 10:30 a.m. New York time Monday, traders said.
Consumer products companies including Clorox Co. and Tupperware Brands Corp. last year used the parallel market to repatriate money or buy inventory, company executives said in conference calls. Many began to report their Venezuelan business at the parallel rate, causing writedowns.
Telefonica, Europe’s second-largest phone company, said last week it would repatriate money at 2.6 bolivars per dollar and said the devaluation cut the value of its Venezuelan assets by 1.8 billion euros ($2.46 billion).
Source: Caribbean Net News
