By Ezequiel Minaya
CARACAS -- Venezuela's bolivar has been losing ground to the dollar in unregulated trading over the first half of the year, dropping to levels last seen following a currency devaluation in 2011, as the private sector drives up the price of a dwindling supply of dollars.
The value of the bolivar fell Thursday to 9.25 to the dollar, according to LechugaVerde.com, an influential local website that tracks the rate of the Venezuelan currency in the outlawed parallel exchange market. Lechuga Verde, which translates to "green lettuce," is a thinly disguised reference to the dollar.
According to Caracas-based research firm Ecoanalitica, the dollar was fetching an average of 8.70 bolivars in the first two months of the year before beginning a slide. The bolivar had a similar swoon in the first weeks of 2011 after the government tossed a 2.60 bolivars per dollar exchange for imports of basic essentials like food and medicine. Officials left in place fixed rates of 4.30 and 5.30 bolivars to the dollar, with the latter rate used to provide companies with limited access to the U.S. currency.
The government tightly controls access to dollars through official channels and with the sale of dollar-denominated bonds that are purchased by Venezuelans in local currency and sold abroad. After selling $7 billion in dollar bonds last year, the government has held back so far in 2012. State oil giant Petroleos de Venezuela SA, or PdVSA, sold $3 billion in 2035 bonds last month in a private placement to the central bank and other public-sector banks. The offer wasn't open directly to Venezuela's chronically dollar-starved private sector.
"The government has not been supplying enough dollars to the market," said Russell Dallen, a managing partner at Caracas Capital Markets. "I thought that in an election year the government would be flooding the market with dollars to alleviate shortages and keep store shelves stocked -- especially with high oil prices -- but, with Chavez ill and not in command, that has not happened," he added. President Hugo Chavez, despite suffering from an undisclosed cancer, is slated to seek re-election in October.
The Venezuelan central bank also sells dollars to local businesses as part of its transaction system for foreign currency-denominated securities, or Sitme, at the rate of 5.30 bolivars per dollar, but it does so in limited supply. The system was created in mid-2010 in a bid to crack down on the unregulated market.
With dollar transactions prohibited unless conducted through the government, a number of websites, such as Lechuga Verde, have become a go-to source for Venezuelans looking to purchase dollars on the sly. The websites often calculate a dollar-to-bolivar rate using data from currency-exchange houses in the Colombian commercial hub of Cucuta, near the border with Venezuela.
Mr. Chavez has leaned heavily on PdVSA revenue and the central bank's reserves to finance an aggressive expansion of public spending ahead of the Oct. 7 presidential election. Many analysts said that Mr. Chavez has stirred i
nflationary pressures and set the stage for a widely predicted currency devaluation in 2013 by flooding bolivars into the local economy with lavish spending on social programs and a hefty raise of the minimum wage.
Some observers also believe that Mr. Chavez, who has battled cancer since last year, has been slow to approve dollar-bond sales this year with his attention diverted to his health.