Venezuela will launch a foreign exchange auction system called Dicom on May 23, President Nicolas Maduro said in a televised broadcast on Tuesday, in an apparent revival of a plan that was announced a year ago but was never put in place. Venezuela maintains a currency control system that provides dollars at a preferential rate to import food and medicine, and over the years has experimented with auction systems to provide dollars at less favorable rates for less important imports.
The Dicom mechanism was unveiled early last year to replace the prior auction system known as Simadi, but Dicom never actually came into effect. "We're ready to bring operations of the new Dicom, an auction system that will regularize the country's currency market," Maduro said in a televised cabinet meeting. He did not say if Dicom would replace Simadi, or offer further details.
The preferential rate is set at 10 bolivars for food and medicine, while the secondary Simadi rate is currently at 724 bolivars for less important items. Dollars on the black market currently fetch 5,500 bolivars. Businesses say that, in practice, they have no access to preferential dollars and almost no access to Simadi. They say the government never allowed supply and demand to determine the exchange rates in the auction systems, meaning supply was ultimately restricted.
The 2014 crash in oil prices left the government without enough hard currency to supply exchange controls, leaving businesses unable to import raw materials or machine parts. That, in turn, has created chronic product shortages throughout the economy.
Maduro says the country is victim of an "economic war" led by political adversaries with the help of Washington. "The new Dicom ... will permit maximum stabilization of everything relating to speculation, the economic war on Venezuela's foreign exchange system," Maduro said during the broadcast.
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