Venezuela Pumps Dollars Into Market and Slows Rout in Currency

By

Patricia Laya

and

Fabiola Zerpa

28 de septiembre de 2018 7:00 GMT-4 Updated on 28 de septiembre de 2018 9:38 GMT-4

Lost amid the economic chaos in Venezuela, the bolivar has actually stabilized somewhat.
In the six weeks since the initial plunge after the government simultaneously carried out a massive devaluation and redenomination of the currency, it has slid just 19 percent in the black market. That may not constitute stabilization in most foreign-exchange markets, but in Venezuela, where hyperinflation has been ravaging the economy for months on end, it’s the closest thing to normality seen in a while.

While far from a major policy victory and possibly only ephemeral, the bolivar’s relative stability is a rare feat for Venezuela and could even help slow the breakneck pace of hyperinflation, which is forecast to reach 1 million percent this year. President Nicolas Maduro devalued the bolivar by 95 percent last month in what was perceived as a tacit acceptance of the ubiquitous black-market exchange, where most Venezuelans acquire dollars.

Black Market Takes a Breath

Venezuela's Maduro devaluted the bolivar by 95% last month

Source: Monitor Dolar

As part of his new economic plan, Maduro also increased the frequency of the country’s official dollar auctions known as DICOM to three a week from one. The central bank auctioned $5.3 million Wednesday at 62 bolivars per dollar, the highest daily amount since the system started operating more frequently in February, according to data from Caracas-based banking consultancy Banca y Negocios.
“With the start of the new system, you see much more significant amounts being auctioned,” said Leonardo Buniak, managing partner at Buniak & Co., a financial consultancy in Caracas. “The central bank has increased its offer and taken off some pressure from the black market.”

After the initial plunge in the black market rate that went hand-in-hand with the official devaluation, the parallel rate has remained in a range of 100 to 116 bolivars per dollar since the start of the month, the first period of relative stability this year, according to data from Monitor Dolar, which reports the average of several rates. The 14 percent decline this month compares with a 63 percent drop in August.
Yet the pause in the black-market devaluation may not last, as the DICOM system remains difficult for Venezuelans to access for Venezuelans and individuals are limited to purchasing a maximum of $2,000 a year. In the meantime, the government continues to print money and annual inflation is running at about 111,000 percent, according to Bloomberg’s Cafe con Leche Index.
— With assistance by Catarina Saraiva