CARACAS (Reuters) – As Venezuela grapples with U.S. sanctions on its vital oil industry, socialist President Nicolas Maduro has made plans to lift some price and foreign exchange controls in a bid to revive the country’s battered economy, sources said.
FILE PHOTO: Venezuela’s President Nicolas Maduro sits between National Constituent Assembly (ANC) President Diosdado Cabello (L) and National Electoral Council (CNE) President Tibisay Lucena during a ceremony to mark the opening of the judicial year at the Supreme Court of Justice (TSJ), in Caracas, Venezuela, January 24, 2019. REUTERS/Carlos Garcia Rawlins/File Photo
Since 2014, Maduro’s government has directly imported and distributed raw material for industries like food processing and construction. But the government has now informed some companies in private meetings that they can buy their own foreign currency to import what they need, five industrial and financial industry sources said.
Until now they have had to go through the government’s complex system of exchange controls to obtain scarce foreign currency.
But business leaders said the shift may have limited impact with Venezuela deep in hyperinflation after five years of recession.
“This has come too late,” said Jorge Botti, a former leader of Venezuela’s largest industry group, Fedecamaras. “Even the most optimistic people, who for months held out for a shift in economic policy, are now betting on a change in government.”
Venezuela’s central bank said on Tuesday that starting in February, banks would be able to sell euros to private companies in “strategic sectors.”
The banks would be assigned euros each Monday depending on how much local currency they had deposited in central bank coffers.
The change comes as Maduro is facing the boldest challenge since taking office in 2013. Opposition leader Juan Guaido has claimed the presidency, arguing that Maduro’s May 2018 re-election was fraudulent. He has won support from the United States and many Latin American countries.
The United States imposed sanctions this week that will likely halt exports of crude oil from state oil company PDVSA to U.S. refineries, cutting off a key source of the OPEC nation’s revenue in order to pressure Maduro into leaving office and allowing Guaido to call elections.
Years of heavy government intervention have prompted several multinational companies to abandon Venezuela. The walk back of regulations comes as the government has allowed the bolivar to depreciate to the parallel rate, after years of controls created a black market for foreign currency.
The changes come after sanctions from the United States and European Union have made it difficult for the government to move money abroad since banks are wary of dealing with it.
Venezuela’s official foreign exchange system has offered very little hard currency to the private sector since 2015, after a collapse in oil prices left government coffers dry.
Maduro blames the economic crisis on private companies, which he accuses of conspiring with the domestic opposition and the United States to wage an “economic war.”
One of the people with knowledge of the policy changes said companies with export capacity would be the only ones that would be able to buy euros from banks.
The government would also make its system of price controls, which are intended to contain inflation but have instead contributed to shortages of basic goods, more “flexible” to allow prices to rise in line with the bolivar’s depreciation, the sources said.
Writing by Luc Cohen; Editing by Phil Berlowitz