[NYTr] Venezuela: Much Ado about the Bolivar Date: Tue, 2 Oct 2007 12:29:15 -0500 (CDT) Via NY Transfer News Collective * All the News that Doesn't Fit excerpted from VIO Venezuela News Roundup - Oct 2, 2007 [Venezuela will undergo a currency change in January of 2008, and the Ministry of Finance is taking measures to ensure that the transition goes smoothly. The Associated Press reports that prices in stores are being listed in both the old currency -- Bolivars -- and the new one -- Bolivares Fuertes, or "strong Bolivars." The change will shift decimal places to the left three times, making 1,000 Bolivars the equivalent of 1 Bolivar Fuerte. The measure has been planned for some time, and is aimed at curbing inflation and stabilizing prices. El Universal reports that Finance Minister Rodrigo Cabezas said, "For more than 26 years, inflation forced us to add more and more zeros to the Venezuelan currency. Monetary reconversion in 2008 will help us fight the battle to attain price stability." In related news, Bloomberg and Dow Jones today report on the weakness of the Venezuelan currency in trading.-VIO] AP via Yahoo - Oct 1, 2007 http://biz.yahoo.com/ap/071001/venezuela_currency.html New Currency Prices in Venezuela The Associated Press CARACAS, Venezuela (AP) -- Businesses in Venezuela are placing new price tags on products in preparation for the transition to a new currency that officials say will help them fight inflation. Regulations that went into effect Monday require retailers to post prices in the new currency -- the "strong bolivar" -- alongside prices in bolivars as a means of preparing consumers for a Jan. 1 monetary shift. The change is relatively simple: shifting the decimal point three places to the left so that, for example, 1,000 bolivars become 1 strong bolivar. "There haven't been any complications so far," said Victor Aguilar, a shopkeeper who sells mobile telephones in downtown Caracas. "I think there could be some problems when people begin paying in the new currency because they are going to be confused." Finance Minister Rodrigo Cabezas told a press conference that cutting three digits from the bolivar -- which has weakened on the black market -- would help curb inflation. "The monetary conversion will come in 2008 to help us with this battle for stable prices," Cabezas said. Critics argue the currency shift is only symbolic, saying it will not stem inflation. The bolivar is fixed at 2,150 to the U.S. dollar under foreign currency controls, but the black market rate for U.S. dollars is more than double the official rate. The currency changeover is another in the long list of adjustments under President Hugo Chavez, who says he is leading Venezuela to socialism. He has already changed the national seal, the design of the flag and renamed the country the Bolivarian Republic of Venezuela, after 19th-century independence hero Simon Bolivar. *** El Universal - Oct 1, 2007 http://english.eluniversal.com/2007/10/01/en_eco_art_finance-minister:-mo_01A1087397.shtml Finance minister: Monetary conversion puts an end to volatile price Minister of Finance Rodrigo Cabezas assured that the monetary reconversion the government of Hugo ChC!vez is implementing is set to close a historic cycle of price instability and will be the first step towards stability. "For more than 26 years, inflation forced us to add more and more zeros to the Venezuelan currency. Monetary reconversion in 2008 will help us fight the battle to attain price stability," Cabezas said in a news conference. He added that reconversion is one of the moves intended to achieve price stability. "This process comprises other economic policies that will make it stronger and successful." Such policies include fiscal, exchange, and monetary policies. "The goal is expanding the scope of domestic production. In this way, we are going to attain the major tool to fight inflation: real economy growth and production." "As of today (Monday) a three-month phase starts for Venezuelans to get acquainted with the bolivar fuerte. In this way, when we use the new coins and bills next January, there will be no doubts." *** Bloomberg - Oct 1, 2007 http://www.bloomberg.com/apps/news?pid=20601086&sid=aGnQJ50l9M3w&refer=news Venezuela's Bolivar Falls on Currency Control Fears By Alex Kennedy Venezuela's bolivar fell to a record low in unregulated trading after President Hugo Chavez vowed to tighten restrictions on foreign exchange trading. Chavez said yesterday the government would stop selling dollars at the official rate of 2,150 bolivars to importers of luxury items such as expensive cars and alcohol. He pledged to ``tighten the screws'' on exchange controls. ``This market depends on confidence, and right now, there's no confidence,'' said Pablo Puentes, a trader with the Caracas brokerage Interbursa Casa de Bolsa CA. The bolivar dropped 2 percent to 5,100 bolivars per U.S. dollar in unregulated currency exchange, from 5,000 on Sept. 28, traders said. Venezuela's currency has fallen 33 percent this year. Venezuela pegs the bolivar at the official exchange rate under restrictions imposed in February 2003. Venezuelans turn to unregulated markets when they can't get approval from the government's Foreign Exchange Administration Commission to buy dollars at the official exchange rate. The bolivar also weakened on speculation a government sale of dollar bonds was too small to meet demand for foreign currency. The government sold local investors $600 million of dollar bonds that it bought from Argentina, which can be resold abroad, and $600 million of its own dollar-linked debt in a joint sale last week. Bond Pricing The government plans to announce the price of the sale and a ``better and more democratic'' distribution of the bonds tomorrow, Finance Minister Rodrigo Cabezas said today. The ministry initially said last month that the results of the sale would be announced today. ``We understand the demand for the bond was at least three times what was offered,'' said Nelson Corrie, head trader at Caracas-based brokerage Interacciones Mercado de Capitales. ``That means a lot of banks and investors seeking dollars will only get a very small part of the bond.'' The yield on Venezuela's 9.25 percent dollar bond maturing in 2027 fell 14 basis points, or 0.14 percentage point, to 8.74 percent at 12:27 p.m. New York time, according the JPMorgan Chase & Co. The price, which moves inversely to the yield, rose 1.3 cents on the dollar to 104.80 cents. *** Dow Jones - Oct 1, 2007 http://www.nasdaq.com/aspxcontent/NewsStory.aspx?cpath=20071001%5cACQDJON200710011252DOWJONESDJONLINE000457.htm Venezuela's Bolivar Sets New Low Vs Dollar In Black Market By Raul Gallegos CARACAS -- Venezuela's bolivar lost ground Monday against the dollar in the country's active black market for U.S. currency, pulled down by growing foreign currency demand. The price of a dollar closed Monday between VEB5,010 and VEB5,110, according to Veneconomia, a local business publication, a new record for the Andean currency since President Hugo Chavez banned dollar trading four and a half years ago. Chavez set capital controls on the economy in February 2003 to stem capital flight at a time of political turmoil and has left those restrictions in place since. Demand for foreign currency continues to grow as a robust economy and generous government spending afford Venezuelans more disposable income to spend as they like. Imports are up. Planes are often booked full as Venezuelans take advantage of the oil bonanza to spend their money freely. Consumers continue to buy record numbers of vehicles and homes. The government allows citizens to access a maximum of $8,000 a year at the official rate of VEB2,150 per dollar, but consumers usually need much more and use the black market to supply that extra need. The Chavez administration has turned to selling dollar-denominated debt in the local market to quell that hunger for dollars, but so far that strategy has failed to deliver. Debt buyers resell the paper overseas in exchange for cash, but then continue to convert as many bolivars into dollars as possible. The latest dollar surge comes at exactly the same time as the government sells $1.2 billion of the Bond of the South III, the third installment of a debt instrument issued jointly with Argentina. * ================================================================= NY Transfer News Collective * A Service of Blythe Systems Since 1985 - Information for the Rest of Us Our main website: http://www.blythe.org List Archives: http://blythe-systems.com/pipermail/nytr/ Subscribe: http://blythe-systems.com/mailman/listinfo/nytr =================================================================