VENEZUELA TIGHTENS FOREIGN EXCHANGE RESTRICTIONS
Venezuela's central bank has ordered
Venezuelan banks and exchange houses to cease foreign exchange
operations with brokers based outside the country, according to
a copy of a central bank telex made available to Reuters.
    The measure, confirmed by a brokerage firm here, has
effectively cut off all foreign participation in Venezuela's
volatile currency market.
    The telex, issued on May 19, was signed by Carlos Hernandez
Delfino, manager of the bank's department of international
operations.
    The telex said the restriction on business with foreign
brokers is in line with an earlier measure prohibiting foreign
exchange houses from selling dollars or other foreign
currencies to anyone living outside Venezuela.
    In recent weeks the Venezuelan government has denied
rumours that it intends to impose foreign exchange controls to
prop up the weakening bolivar.
    But brokers said the central bank's move is seen as a de
facto currency control. "It is definitely a control in the sense
that there's no longer complete freedom to operate," one broker
here said.
    "Gradually they're imposing restrictions and the direction
is towards complete control," the broker said.
    The broker, who requested anonymity, said virtually all his
Venezuelan customers had stopped doing business with him since
the central bank issued the telex and followed it up with
telephone calls.
    He said that before the restriction was imposed the volume
of his firm's transactions with Venezuela was about 10 mln dlrs
a day. "It was a frenetic market, it was really quite active," he
said.
    The broker said he saw no logical explanation for the
prohibition because his firm only acted act as an intermediary
between Venezuelan brokers, exchange houses and banks.
    "We weren't buying dollars from Venezuelans, that's
ridiculous," he said. "They've been on a rampage against
foreigners."
    The broker noted that two months ago Venezuela's central
bank quietly announced that banks doing foreign exchange
business outside Venezuela would have to respect a new 200 pct
reserve requirement.
    In February, the central bank also prohibited trading in
bolivar futures, the broker said.
    "We used to have a forward market," he said. "For a small
currency it was miraculous."
    He said the bolivar, which averaged 20.29 to the U.S.
Dollar in 1986, would continue to slip from its current range
of 28.35 to 28.50 because the central bank was rapidly running
out of foreign reserves to support the currency on the free
market.
 REUTER
