Post by privateinvestors on Aug 18, 2013 21:24:52 GMT 4
Central bank holds bonds that may be used in auction sales
As of June 30, the organization reported securities amounting to USD 9.7 billion
Balance sheets published by the Central Bank of Venezuela (BCV) in its first-half financial report show that the organization holds foreign-currency bonds that may eventually be used to increase the dollar amounts auctioned under the Ancillary Foreign Currency Administration System (Sicad).
Sources from the finance sector note that the central bank is certainly analyzing that possibility. Companies would, hence, purchase those bonds using bolivars and then, through their respective banks, sell them overseas to obtain dollars to import raw materials or finished products.
This alternative was contemplated when the regulation governing Sicad, a system through which the central bank auctions dollars, was drafted.
Those standards establish that the Republic, its decentralized bodies and any other entity may issue bonds in dollars to supply the system.
As of June 30, the central bank holds securities amounting to USD 9.7 billion, but that figure says little about the quality of those assets.
Nevertheless, everything seems to indicate that the central bank has received those bonds as repayment of loans granted to state-owned oil company Pdvsa; therefore, those assets would be comprised of top-tier bonds that could easily be traded overseas.
To date, Sicad has held only two auction sales per month, for a total of USD 425 million, a sum failing to meet companies' demands.
In addition to bonds, Sicad is expected to receive currency in cash from the National Development Fund (Fonden), a government fund that holds a portion of petrodollars, as well as central bank reserves and deposits made by private companies.
Foreign reserves are not a significant factor. Those reserves, in which the central bank accrues dollars to pay for imports and foreign debt, have fallen 23% so far this year, from USD 29.88 billion to USD 23.04 billion as of early August.
Seventy-two percent of foreign reserves consists of gold, while the portion of currency in cash that could be used by Sicad amounts to some USD 2 billion, a sum allowing little flexibility.
In an environment where lagging production leads to a rising dependence on imports, the government is party to agreements to sell oil to foreign countries at discounted prices, Pdvsa's extraction rate declines and foreign debt spikes, cash reserves inevitably plummet.
Another factor worth noting in dwindling overall reserves is the decline in gold prices, which forces the central bank to lower the prices it allocates to gold reserves.
Over the first half of the year, the gold portion of reserves amounted to USD 18.07 billion, a loss of 10% since last December.
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