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| Venezuela Announces Plan to Relax Currency Controls | |
| (about 1 hour later) | |
| CARACAS, Venezuela — Venezuelan officials on Tuesday announced details of what they said would be a free market in which people and businesses could exchange local currency for dollars — an easing of the tightly controlled exchange rates that critics say have fed the nation’s economic crisis. | |
| The change could mean a significant devaluation of the currency, the bolivar, although the extent of any devaluation depends on the amount of dollars the government allows to pass through the free market exchange. | The change could mean a significant devaluation of the currency, the bolivar, although the extent of any devaluation depends on the amount of dollars the government allows to pass through the free market exchange. |
| Officials made clear, however, that most foreign currency would not go through the new free market exchange. | Officials made clear, however, that most foreign currency would not go through the new free market exchange. |
| Venezuela’s economy was already struggling before the recent drop in the price of oil, the country’s main export. Almost all of the government’s hard currency comes from oil sales, so the drastic fall in oil prices in recent months has hit Venezuela particularly hard. | Venezuela’s economy was already struggling before the recent drop in the price of oil, the country’s main export. Almost all of the government’s hard currency comes from oil sales, so the drastic fall in oil prices in recent months has hit Venezuela particularly hard. |
| The government said it would continue to operate with a three-tier exchange rate system, and that the primary rate of 6.3 bolivars to the dollar would remain in place for imports that are deemed essential, including food, medicine and agricultural supplies, officials said. | The government said it would continue to operate with a three-tier exchange rate system, and that the primary rate of 6.3 bolivars to the dollar would remain in place for imports that are deemed essential, including food, medicine and agricultural supplies, officials said. |
| “Approximately 70 percent of the needs of the country’s economy is guaranteed at 6.3,” said Rodolfo Marco Torres, the finance minister, who announced the changes to the foreign exchange system. | “Approximately 70 percent of the needs of the country’s economy is guaranteed at 6.3,” said Rodolfo Marco Torres, the finance minister, who announced the changes to the foreign exchange system. |
| Economists say that the bolivar at 6.3 to the dollar is heavily overvalued and has exacerbated distortions in the economy, including high inflation and shortages of basic goods. The dollar has been trading on the black market for about 190 bolivars. | Economists say that the bolivar at 6.3 to the dollar is heavily overvalued and has exacerbated distortions in the economy, including high inflation and shortages of basic goods. The dollar has been trading on the black market for about 190 bolivars. |
| A devaluation could help ease the government’s budget deficit, but it could also further feed inflation by making some imported goods more expensive. | A devaluation could help ease the government’s budget deficit, but it could also further feed inflation by making some imported goods more expensive. |
| Mr. Marco Torres said that in addition to the primary exchange rate of 6.3, some businesses, such as auto parts suppliers, would be invited to buy dollars at an already existing intermediate exchange rate, which is currently at 12 bolivars to the dollar but could change over time. | Mr. Marco Torres said that in addition to the primary exchange rate of 6.3, some businesses, such as auto parts suppliers, would be invited to buy dollars at an already existing intermediate exchange rate, which is currently at 12 bolivars to the dollar but could change over time. |
| The new free market system will replace an existing third tier that has operated at about 50 bolivars to the dollar. | |
| He did not say how much money would flow through the free market platform, and it remains unclear what the new exchange rate will be. But by receiving more bolivars for the dollars it exchanges, the new system could help raise more money for the government. | |
| Mr. Marco Torres said it would be “a totally free system where there will be sellers and buyers of hard currency. The market itself will set the rate.” | Mr. Marco Torres said it would be “a totally free system where there will be sellers and buyers of hard currency. The market itself will set the rate.” |
| The system appeared to be similar to one that the government shut down in 2010, when it jailed some bankers whom they accused of manipulating currency transactions. | The system appeared to be similar to one that the government shut down in 2010, when it jailed some bankers whom they accused of manipulating currency transactions. |
| The changes could affect American businesses, which could be forced to write down millions of dollars in assets that they hold in Venezuela, which could now be worth much less in relation to the dollar. | The changes could affect American businesses, which could be forced to write down millions of dollars in assets that they hold in Venezuela, which could now be worth much less in relation to the dollar. |