Chavez tries to stop dollar exchange by indefinitely halting stock and bond trading

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SP33Demon

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Venezuela Temporarily Closes Parallel Currency Market

Merida, May 18th, 2010 (Venezuelanalysis.com) – After president Hugo Chavez signed the reform to the law against illicit exchange on Sunday and it came into effect Tuesday, the government has now temporarily suspended foreign currency bond trading, which was a key factor in the black market devaluation of the bolivar, and has made the Central Bank of Venezuela (BCV) the only means for buying and selling foreign currency bonds.

“This is to regulate the bourgeoisie more... we’re going to really give the dollar speculation hell,” Chavez said, saying that if it were necessary he wouldn’t have a problem with eliminating the stock exchange altogether. He also encouraged the population to denounce speculation through phone numbers and his twitter account.

Venezuela has a two-tiered official exchange rate of Bs 4.3 per dollar, for most imports, and Bs 2.6 per dollar for transactions identified as priorities such as food and medicine.

However, in the parallel or unofficial market the Bolivar is currently nearly twice as weak as the official rate, trading at Bs 8.5 per dollar. This parallel market is largely conducted through the buying and selling of bonds.

In the reformed law, the main changes are that foreign exchange is understood to mean not just currency, but also foreign currency bonds, and that the BCV will have exclusive rights to authorise the buying and selling of foreign currency bonds, and brokerage firms will be completely excluded from such transactions.

Specifically the law declares, “Whoever, in one or multiple transactions, within one calendar year, without intervention of the BCV, buys, sells, or in any way offers, transfers, or receives foreign currency between an amount of 10,000 dollars to 20,000 dollars, of the United States of America or their equivalent... will be sanctioned with a fine valued at double the amount of the operation, in bolivars.”

The minister for finances and planning, Jorge Giordani, explained to the press today that the stock exchange has been highly speculative, hence the government modified the law to allow the BCV to take on a “protagonist role” in the foreign currencies market, meaning it would be the only institution allowed to set currency prices, to the exclusion of the stock exchange and brokerage systems.

Giordani said that on the stock exchange, stocks were worth 33% of their original value in just one day, “a phenomenon that isn’t seen in any other part of the world... this was a mechanism for the extraction of foreign exchange...they were trying to end with our international reserves through this mechanism.”

The president of the National Commission of Stocks, Tomas Sanchez, said the government was temporarily suspending the selling of stocks and bonds in foreign currency, which is basically equivalent to closing the parallel exchange market, with the exception of cash exchanges made in the street or overseas bank account deposits.

“The National Commission of Stocks initiated a series of investigations...and we obtained a range of evidence of possible speculation operations. Likewise, we’re verifying everything related to custody of these bonds because we have some suspicions that these institutions [stockbrokers] are involved in currency exchange crimes.”

The president of the BCV, Nelson Merentes, explained to the press how the BCV would attempt to control the bond and stock trading. It will define a price band with upper and lower limits of the value of the bolivar, or basically create a floating parallel market rate fixed by the bank, but in which there will be transparency in the transactions. The BCV will base this band on international market prices.

“We want to substitute the level of possible financial speculation that existed with something that becomes a routine procedure of mediation of the bonds in foreign currency,” Merentes said.

He said the BCV, through its technological mechanisms, will call on those who want to sell bonds and those who want to buy them in order to form a kind of compensation chamber, turning itself into a mediator between demand and offers, which would allow both sides to be happy with the transaction.

“We believe that with this mechanism in place, speculation won’t exist, because the bank’s job isn’t to make money but rather to look for balance between the two sides, according to clear rules,” Merentes said.

Previously, the value of the Bolivar would drop every few days, without any real reason, Merentes explained. Now, there will be a web page where the number of offers, the amounts, and the number of claimants will be displayed.

The price of the bolivar on the parallel market is important because it affects the cost of imports. According to national assembly legislator Rafic Souki, 90% of importing companies in Venezuela go to Cadivi, the government foreign exchange institution, to obtain the dollars they need, meaning only 10% look for dollars on the parallel market. He said the reason why they don’t go to Cadivi is because they don’t meet the requirements.

“These companies have debts with the Venezuelan Social Security Institute (IVSS) and with the Obligatory Housing Savings Fund (Faov),” Souki said. “In the end all Venezuelans are victims of this speculative wave that pushes up the prices of goods and services”.

Souki used the example of car assembly companies in Venezuela, who “even though they receive dollars through Cadivi to import car parts, once they come to selling the car on the national market they sell it at a price based on the parallel market exchange rate.”

Already the government has started cracking down on illegal speculation, inspecting one company yesterday, Heptagon, a brokerage firm, for possible irregular management of foreign exchange in order to alter the exchange rate. On 14 May four other such establishments were inspected for not complying with legal requirements

One man, Jaime Renteria, a representative of companies that act as stockbrokerage firms, was also arrested for presumed illegal foreign exchange and undue exchange rate intervention.
http://venezuelanalysis.com/news/5374

Wow, talk about crippling your economy. So Chavez is really "sticking it to the rich" by crippling their US Dollar investments. Apparently over 30 brokerages were also raided and nobody there knows what's going to happen to their foreign currency investments after the dust settles. I can bet you that black market trading of the dollar is going to go through the roof and the bolivar will continue to collapse.

This punctuates Chavez's despicable weekend seizure of a private University, US bauxite mining company NorPro, a Luxemburg steel company, a group of transport companies, and a private 370 acre farm of an old political rival which was "opened to the public". Amazing that this guy hasn't been assassinated yet by the people.

More on the weekend seizures here:
http://www.investors.com/NewsAndAnalysis/Article.aspx?id=534341#
 
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yllus

Elite Member & Lifer
Aug 20, 2000
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Sounds like he's pulling out all the stops before his make-or-break constitutional reform (the one that would make him President-for-life) is tried again.

Chavez is still quite popular with some demographics but you can only blab so much to distract people from watching their country fall apart around them. He's on his way out.
 

zephyrprime

Diamond Member
Feb 18, 2001
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Ha ha. These Latin american tin pot dictators are all the same. Just watch as economic ruination comes to the nation. Chavez will then be deposed but it seems like the electorate never learn their lesson. Sigh.
 

Noobtastic

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Jul 9, 2005
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LOL!

I remember the John Pilger documentary about how Chavez is a victim to Western imperialism and he is one of the few SA leaders who did not get canned by the CIA.

http://www.johnpilger.com/page.asp?partid=333

I just love how all the Leftists go on and on about how righteous and wonderful these regimes are...yet still live in Australia, USA, Britain, etc...
 

DanDaManJC

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Oct 31, 2004
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LOL!

I remember the John Pilger documentary about how Chavez is a victim to Western imperialism and he is one of the few SA leaders who did not get canned by the CIA.

http://www.johnpilger.com/page.asp?partid=333

I just love how all the Leftists go on and on about how righteous and wonderful these regimes are...yet still live in Australia, USA, Britain, etc...

Meh. Trolls-ma-boat? Fine ill bite.

Look... what you're doing here is completely patronizing one point of view and dismissing the entire work of evidence that countless leftist loonies have compiled through the years. I'm not so much concerned that you don't agree with them but that this off hand remark will be blindly accepted by those who have no idea what these leftists are talking about. Even the most looney and extreme leftists aren't so deluded as to think everything is due to the evil US imperialists, there's a reason these leftist intellectuals write books -- and it's because the issues aren't black and white.

The fact is that outside these leftist loonies, this stuff isn't talked about in the mainstream media. You won't hear about the US backed dictatorships slaughtering millions of innocents on fox news, msnbc or cnn. That kind of commentary simply won't bring in the advertising money. The information's out there, it's just more work to get to it. There's a shitton of examples from South America... just wikipedia the history of Chile, El Savador, Nicaragua to name a few places where the US backed one mean regime over a good one in US interests.
 

Noobtastic

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Jul 9, 2005
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Meh. Trolls-ma-boat? Fine ill bite.

Look... what you're doing here is completely patronizing one point of view and dismissing the entire work of evidence that countless leftist loonies have compiled through the years. I'm not so much concerned that you don't agree with them but that this off hand remark will be blindly accepted by those who have no idea what these leftists are talking about. Even the most looney and extreme leftists aren't so deluded as to think everything is due to the evil US imperialists, there's a reason these leftist intellectuals write books -- and it's because the issues aren't black and white.

The fact is that outside these leftist loonies, this stuff isn't talked about in the mainstream media. You won't hear about the US backed dictatorships slaughtering millions of innocents on fox news, msnbc or cnn. That kind of commentary simply won't bring in the advertising money. The information's out there, it's just more work to get to it. There's a shitton of examples from South America... just wikipedia the history of Chile, El Savador, Nicaragua to name a few places where the US backed one mean regime over a good one in US interests.

i dont dispute CIA's meddling in other countries - but since eisenhower this was always part of the cold war and fighting communism by propping up pro-american dictatorships.

the kirkpatrick doctrine was paramount in guaranteeing US hegemony against competing soviet interests which threatened the sovereignty of the USA.

it was either that, or actually sending US troops to fight communism like during the korean war - but most americans wouldn't accept that in the 50s/60s, etc...

either way, a dictatorship is a dictatorship is a dictatorship.

people like pilger and chomsky care little about the reality and actual leadership, but are more concerned by the ideological influence of leaders.

chavez is an ape and a troll, but because he defies america he is suddenly worshiped by the left.

the same goes for many other regimes or people - iran, iraq, north korea, even the palestinians - as they all posit themselves as opponents of the west which people like pilger have a deep-seated hatred of.

Once you open up the mind of a leftist you discover he is not inspired by human rights (though invoking morality is a common thing) but rather a dislike and hatred of the west and capitalism.

This is why Chavez is loved, even though Venezuela is becoming a failed state both economically and socially.
 

Exterous

Super Moderator
Jun 20, 2006
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I wonder how all this will end.

Normally I would think the route of North Korea but they have too much oil for that to happen so I am going to say brutal civil war when the economy completely collapses
 
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