Using SICAD, Venezuela Central Bank to Auction $300 Million Bonds

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Using SICAD, Venezuela Central Bank to Auction $300 Million Bonds
Using SICAD, Venezuela Central Bank to Auction $300 Million Bonds

Using SICAD, Venezuela Central Bank to Auction $300 Million Bonds

Venezuelan government is all set to attract dollars and for that it has decided to initiate several decisions; one of them is to issue dollar dominated bonds. The latest decision has come from Venezuela’s central bank which informs that it will auction $300 million in previously issued dollar-denominated bonds through the SICAD currency exchange system.

The Measure is to Boost USD inflow in the National Economy

The bank aims to boost the flow of dollars to the economy and with the auction wherein it will offer bonds from the state oil company PDVSA. The bonds will be maturing in 2035 to participating businesses. It will be the first time that SICAD has auctioned debt rather than cash in its history. Earlier in 2012, PDVSA had issued $3.3 billion in bonds in a private placement with the central bank.

At the time of issuing $3.3 billion in bonds in 2012 in a private placement, purchasers were told that the bonds will mature in 2035. Now, its auction of $300 million in previously issued dollar-denominated bonds through the SICAD currency exchange system will enable companies to buy those securities and resell them for dollars to pay for imports.

However, the government agency has put a condition for purchasers as it says that corporate participants will be restricted to companies importing food and beverages, bicycles and parts, toys, textiles and chemicals. It has announced that interested parties can send their applications until Thursday and wait for results to be announced on Friday.

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Good News for Individuals

Now individuals for foreign travel too can benefit from the auction as the central bank of Venezuela has said that SICAD will also be auctioning $30 million for them for foreign travel. The latest measure on the part of the government has come after it faced a lot of criticism from the economists who claim that the recent slowdown in the growth rate is due to foreign exchange bottlenecks.

What is SICAD?

The SICAD which stands for Complementary System for Administration of Foreign Currency is a body that operates in parallel with a decade-long currency control mechanism. It provides dollars at a weaker rate than the official exchange rate of 6.3 bolivars to buyers.

It was reported that The SICAD was established as a modified Vickrey auction mechanism to be used by the Central Bank of Venezuela for the allocation of public debt bonds.

To contact the reports of this story: Jonathan millet at john@forexminute.com