CARACAS – Venezuelan President Hugo Chavez signed a new law that prohibits brokerage houses from trading in the bolivar or in dollar-denominated government bonds and establishes a new state-run financial exchange.
“I’m enacting the Capital Markets Law. It’s a law that will allow us to escape the rot of capitalism,” Chavez, who signed the legislation during a Cabinet meeting aired on state television, said Tuesday.
The leftist president said the new law includes the creation of the Public Capital Exchange, which will begin operating “in the coming weeks.”
The law also authorizes the creation of the Securities Superintendence, a replacement for the current National Securities Commission, and provides a road map for a new securities system to be operated by entities authorized by that new regulatory body, he added.
“The revolution keeps taking steps to create a new system, the transition” to what Chavez calls the socialism of the 21st century.
The National Assembly on Aug. 11 approved the Capital Markets Law, urgently debated after May’s sharp fall of the bolivar against the dollar in the parallel currency market.
Until then, brokerage firms had been authorized to sell dollar-denominated government bonds, which provided a legal means for Venezuelans to skirt exchange controls in place since 2003 and gain legal access to dollars.
The government said in May that “speculation” in the market for public debt had caused the parallel dollar price to climb to double that of the higher of the two official exchange rates.
It responded by suspending that market, prohibiting private brokerage firms from trading those dollar-denominated securities and giving exclusive control over those transactions to the Central Bank.
Since January, Venezuela has maintained a two-tiered exchange rate of 2.60 bolivares and 4.30 bolivares to the dollar, respectively.
The first rate is for high-priority goods and the second for non-essential items. Gaining access to the limited to supply of dollars at those rates makes it difficult for some importers to conduct their businesses. EFE