The National Assembly approved the reform to the Foreign Exchange Control Laws today (5/13/2010).
As indicated in our previous alert, the “bond swap market” (also known as “US$ Permuta Market”) has been defined as a “foreign exchange transaction”. By placing the “US$ Permuta Market” under the Scope of the Law, it will be illegal to trade in securities denominated in US$ outside of the institutional trade to be organized, regulated and intervened by the Ministry of Finance and the Central Bank of Venezuela. It is expected that a “regulatory framework” for the trade with securities denominated in USD will be issued shortly by the Central Bank.
For details into the new law: http://www.asambleanacional.gob.ve/index.php?option=com_content&task=view&id=24801&Itemid=27
In a press conference yesterday (5/18/2010), the head of the Central Bank and the Minister of Economic Planing addressed the nation indicating that the implementing regulations will be issued within the next week, indicating that there will be a parallel market or a market with USD denominated securities organized by the Central Bank, under a platform that will guarantee no speculative pricing and under the intervention and control of the authorities, permitting the value of the securities, and thus, the rate of exchange of the USD to fluctuate within a band or range. They further announced that “Stock Brokerage Companies” (Casas de Bolsa y Sociedades de Corretaje) will be banned from participating in this market, indicating that investigations will follow to determine their potential responsibility for illegal speculation at the now banned “Permuta Market”.
We will issue updates when the authorities and the Central Bank take the expected regulatory measures.