Venezuela Won’t ‘Burn Reserves’ to Supply Market, Sanchez Says

By Corina Rodriguez Pons and Daniel Cancel

June 10 (Bloomberg) -- Venezuela won’t “burn reserves” to supply a new currency market that aims to stem a surge in inflation, securities regulator Tomas Sanchez said.

“The state won’t burn reserves at the beginning with this market like they did earlier this year,” Sanchez said yesterday in an interview in his office in Caracas. “The central bank will be an arbitrator and will establish conditions. When we see someone bidding once, twice, five times, we’ll detect that person because the system has filters.”

The central bank’s foreign reserves plunged 23 percent this year as it sought to shore up the parallel market. President Hugo Chavez dismantled the unregulated currency market on May 18 after the bolivar slid to a record low 8.2 per dollar and consumer prices surged the most in seven years in April. He blamed currency speculators for the pickup in inflation and said brokerages were fueling capital flight, laundering money and setting artificial exchange rates.

The central bank will share information about individuals and companies bidding to buy dollars with the Finance Ministry and Foreign Exchange Board to prevent abuses and verify the origin of funds, Sanchez said. Venezuela will prevent capital flight by setting restrictions for investors seeking to buy dollars while the number of brokerages, banned from operating in the new market, will be reduced to less than 20, he said.