Venezuela Has $5 Billion Stockpile to Boost Unregulated Bolivar

Venezuela’s central bank may inject more than $5 billion of dollar-denominated securities into the financial system this year to strengthen the bolivar in the unregulated foreign-exchange market, a government official said.

The government is seeking to push the currency to 5 per dollar from 6.55 and maintain it at those levels through 2013 -- a weaker rate than the 4.3 target President Hugo Chavez gave last month, said the official, who declined to be identified because he’s not authorized to speak publicly.

Dollar-asset sales of about $5 billion will likely be too little to meet demand in the unregulated market from Venezuelan companies and individuals who can’t get government authorization to buy U.S. currency at the official rates, said Asdrubal Oliveros, a director at Caracas-based Ecoanalitica. He estimated $12 billion may be needed to spur a rebound in the currency.

“I think $5 billion to stabilize the parallel rate is insufficient,” Oliveros said in a phone interview.

Chavez devalued the official rate for the first time since 2005 on Jan. 8, creating a multi-tiered system where imports deemed essential receive a rate of 2.6 per dollar and non- essential items get 4.3. He said in a Jan. 15 speech that the parallel rate would be “dragged down” to 4.3, matching the weaker of the two official rates.

The bolivar has slid 10.4 percent since that speech as government delays in selling dollars at the official rates spurred demand for the U.S. currency in the parallel market. It dropped 0.5 percent yesterday in unregulated trading to 6.55 per dollar, the weakest since Feb. 10, traders said.

Bigger Auctions

The central bank has issued about $260 million of short- term dollar-denominated bonds in auctions this year in a bid to bolster the currency. The bank may increase the size of those auctions to as much as $100 million from a previous maximum amount of $50 million, the government official said in an interview in Caracas.

The government lets investors buy the dollar-based notes with bolivars, which allows them to circumvent the foreign- exchange regulations and obtain U.S. currency when they mature.

The country isn’t preparing to issue $500 million of bonds in a single auction or sell debt in international markets soon, as reported by local newspaper El Mundo last week, the official said. The government and state-run oil company Petroleos de Venezuela SA will likely sell bonds in overseas markets at some point this year, he said.

$115 Million a Day

The central bank, which has foreign reserves of $30.8 billion, is selling about $115 million on average a day at the government-set rates this month, the official said. The bank, which buys dollars from PDVSA, will seek to keep reserves above the previously established “adequate level” of $28 billion this year, the official said.

Those daily dollar sales may not be enough to meet demand from importers, which will hurt government efforts to contain inflation by pushing more companies into the unofficial market, Oliveros said.

Consumer prices rose 27 percent in Venezuela last year, the highest among 78 economies tracked by Bloomberg. The bolivar fell to a record low on Aug. 4 of 7.05 per dollar last year in the unregulated market, pushing up prices of some imports.

Chavez seized retail stores majority-owned by France’s Casino Guichard Perrachon SA last month after threatening to expropriate businesses that raised prices following the devaluation.