Venezuela temporarily halts bond trading
CARACAS, Venezuela – Venezuelan authorities temporarily halted the trading of government bonds yesterday and said they would seek to control Venezuela’s currency exchange rates by setting a range of permitted prices in the bond market.
National Securities Commission president Tomas Sanchez said that bond trading is being suspended while new regulations are established following the approval last week of legislation increasing the Central Bank’s control over currency trading.
The government also plans to seize control of brokerage firms suspected of conducting “speculative operations,” Sanchez said.
Central Bank President Nelson Merentes, meanwhile, announced a plan to establish a band with maximum and minimum prices in bond trading, which until last week had been an important outlet for Venezuelans to obtain US dollars.
President Hugo Chavez is seeking to crack down on currency speculation that he blames for soaring inflation and the decline of Venezuela’s bolivar currency on the unregulated market. The embattled bolivar reached 8.30 bolivars to the dollar on the so-called parallel market yesterday — almost twice the official exchange rate of 4.30 applied to nonessential goods.
The government is worried because the rising price of dollars on the parallel market increases the cost of consumer goods in Venezuela, which imports more than half the products it consumes despite Chavez’s efforts to boost domestic production.
Roughly 30 per cent of imports and 70 per cent of capital repatriation traditionally occurs through the government bond market, according to the Caracas-based Ecoanalitica think tank.
Consumer prices jumped 5.2 per cent in April alone, driving the annual inflation rate to 30.4 per cent — the highest in Latin America — according to the Central Bank and National Statistics Institute.
Planning Minister Jorge Giordani accused brokerge firms and Venezuela’s media of trying to drive up the cost of the bolivar on the parallel market, and he warned they could face criminal charges “if they continue this perverse game of creating expectations” within the market.
“The Attorney General’s Office will have to take action,” Giordani said.
