Venezuela moves to resume dollar sales, halting bolivar rout

A person holds dollars and Venezuelan bolivares to pay for gasoline in Caracas, Venezuela. (Courtesy: Bloomberg)

Venezuela is set to resume dollar sales via banks, aiming to stabilize its currency after a US oil blockade disrupted the market. Oil sale proceeds will be routed through the central bank, helping prevent extreme bolivar depreciation and potential hyperinflation.

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Venezuela is preparing to resume sales of dollars, bringing relief to its battered currency after a US oil blockade riled the local foreign-exchange market.

Banks in Caracas contacted corporate clients this week to offer the first significant supply of dollars from the government since mid-December, according to people familiar with the matter who were not authorized to speak publicly.

The banks are collecting bids, though no funds had been disbursed as of Thursday, one of the people said.

The move follows the Trump administration’s authorization of two of the world’s largest commodities traders to sell Venezuelan oil. That revived hopes that some proceeds could reach the parched foreign-exchange market, helping stabilize the bolivar after weeks of gyrations.

Speaking to a group of business representatives later on Friday, Venezuela’s acting President Delcy Rodriguez said that the proceeds from oil sales will be sent through the central bank to private financial institutions to supply the foreign exchange market.

“Our concern is that foreign currency should drive the national economy to guarantee Venezuela’s full productive capacity. Let’s not repeat the mistakes of the past,” she said.

Alejandro Grisanti, a director at local consultancy Ecoanalitica, said the funds are coming from a trust set up in Qatar to receive oil-sale proceeds. The move helps stave off a potential extreme depreciation in the exchange rate, which “would have left us on the verge of a new hyperinflation,” he said.

The bolivar stabilized in parallel trading on Friday at below 500 per dollar, according to prices posted on crypto trading platforms.

It had swung wildly since the US military began blocking oil exports, which dried up dollar supply and sapped the government of its principal source of foreign earnings.

The situation worsened after the US captured Nicolas Maduro, with the bolivar weakening more than 20% to around 800 per dollar at one point, stoking fears of another currency crisis.

Read more: Venezuela to Set up Funds for Oil Revenues and Amend Energy Law

In addition to authorizing some trading of Venezuelan oil, Trump met with oil companies to discuss potential investment in the nation’s energy industry. On Thursday, acting President Delcy Rodriguez presented a reform to the nation’s energy laws and announced the creation of two funds into which dollars from oil sales will be funneled.