On June 4, 2010, in an effort to combat its soaring inflation, Venezuela enacted a new exchange law (Convenio Cambiario No. 18) that introduced currency exchange bands under a newly regulated parallel system (referred to as the SITME¹) controlled by the Central Bank of Venezuela (BCV). The BCV recently reopened the parallel currency market by establishing an exchange rate trading band between 4.3 and 5.3 bolivars per U.S. dollar. The 4.3 exchange rate at the lower end of the band is the same rate as the government’s official rate for “nonessential” goods. Entities domiciled in Venezuela can access the SITME by buying dollar-denominated securities through authorized banks. The law imposes volume restrictions on each entity’s trading activity and caps such activity at a maximum equivalent of $50,000 per day, not to exceed $350,000 in any given month. As a result of the new law, foreign currency transactions conducted outside of the SITME or the Commission for the Administration of Foreign Exchange (CADIVI) (which governs exchanges at the official rates) could be considered illegal.

[1] Sistema de Transacciones con TÍtulos en Moneda Extranjera.