(Bloomberg) -- Venezuela repealed portions of laws governing foreign exchange, enabling businesses and individuals to swap money at designated trading houses and increasing access to hard currency after more than a decade of strict controls.
The changes passed by the politically omnipotent constituent assembly Thursday are to take effect Aug. 20, when the government is simultaneously planning to slash five zeroes off denominations of its near-worthless bolivar currency. Inflation that could reach 1 million percent this year and a deep depression have forced President Nicolas Maduro to begin dismantling a Byzantine system that has left citizens desperate for food and medicine.
The government did not say at what rates it would offer to sell currencies at trading houses. In April, Maduro awarded 16 exchange licenses to allow trades between the bolivar and cryptocurrencies.
The late President Hugo Chavez began limiting money-changing in 2003 in a bid to stem capital fight, but in the years that followed, the exchange regime engendered widespread corruption and starved local industries of hard currency needed for imports.
Price Patrol
As dollars have dried up on official exchanges, most Venezuelans rely on a thriving black market that has created massive disparities and distortions. While greenbacks officially sell for 172,800 bolivars -- the current price determined by a weekly central-bank currency auction -- dollars fetch over 3.5 million bolivares on the street.
Venezuelan authorities regularly police prices and force business owners to slash prices to comport with official rates. Diosdado Cabello, president of the constituent assembly, said Thursday’s measure could would ease distortions.
“Who does the criminal dollar ultimately affect? The people,” he said.
Chavez first installed capital controls in early 2003 after surviving an April 2002 coup attempt and a two-month oil strike later that year. He allowed the brokerage-led market to flourish and used government bond sales to alleviate hard-currency demand. He abruptly ended the FX system and jailed executives for supposed economic crimes amid accelerating inflation and a weaker bolivar.