Expert: Margie - 10/12/2009

Question
Hola Margie,
como estas ? My question is about the time line it takes to transfer money out. I own a beach house in Venezuela that I am selling in Bolivars, it is worth around 400,000 BsF plus I have over 110,000 in the bank. I want your opinion on what is quickest and safest way to transfer this money to US $s into a US bank account, or is it better to transfer to a UK account as I have one there also ? Thank you.

Answer
Hi Roy,

There is no way that I know of that you will be able to transfer money out of Venezuela, because of the foreign currency control managed by CADIVI. The best way to do this at the moment would be acquiring ADR's or Venezuelan Bonds which will actually come out in few days. You will need to contact a local company to get this done if you are interested on doing it this way.  Another way would be selling it in dollars or GBP.

"Venezuela To Sell More Dollar Bonds, Faces '09 GDP Decline
By Darcy Crowe and Dan Molinski
Of DOW JONES NEWSWIRES

CARACAS (Dow Jones)--Venezuela plans to continue selling dollar-denominated bonds and push the financial sector to increase lending in a bid to boost sagging economic activity and prop up the local currency.

State-oil company Petroleos de Venezuela SA (PdVSA) will probably follow a $5 billion bond sale by the government with its own issue, Finance Minister Ali Rodriguez said Thursday after a joint press conference with Planning Minister Jorge Giordani and central bank President Nelson Merentes.

Rodriguez said the conditions and amounts for the bond offer are still being analyzed.

The measure is part of the government's efforts to bolster the bolivar in an unofficial market for U.S. currency that has become an essential lever for the Venezuelan economy. Merentes said the so-called parallel rate should have a ceiling of about VEF4.

The dollar currently fetches around VEF5.3 in the parallel market, twice the official VEF2.15 peg. Dollar requests by companies and individuals are being increasingly turned down by the government, which is facing a dollar shortage amid a steep fall in oil prices from their 2008 record highs.

The bonds, which are sold in bolivars to local investors who can then turn around and sell them abroad for dollars, helped bring down the parallel rate to a high of almost VEF7 in August.

"We are looking for some rationality so the (unofficial rate) doesn't have a negative economic influence," said Merentes. The parallel rate was partly blamed for a 2.4% economic contraction in the second quarter by making more expensive imported materials for the manufacturing industry.

Alejandro Grisanti, director of Latin America research at Barclays in New York, said he doubts the government can bring the parallel rate down to VEF4 for $1 if it only does random, mega-bond placements such as the $5 billion dollar-denominated sale last week.

Beyond the bond sales, market observers say the government also frequently intervenes in the parallel market in an unofficial fashion, selling dollars to boost the bolivar.

But Grisanti said that for the government to achieve its goals in terms of the exchange rate, it needs to go above board and set up a "transparent and recurring" system of dollar sales, perhaps done each week, which could "convince people that the exchange rate is sustainable."

Merentes said the economy could possibly suffer a contraction this year and that the government estimates that it could post zero growth combined with inflation at 27%. In 2010, the economy should rebound, Merentes said, while inflation could come down to 22%.

President Hugo Chavez said weeks earlier that his administration would unveil dozens of measures to boost the economy. Giordani, the planning minister, said the measures will be announced gradually by several of Chavez's ministers.

Giordani added that the overall goal for the government is to boost the economy, limit inflation and create more jobs.

Part of the plan will include pushing state and private banks to increase lending to trigger economic activity.

"We'll use moral persuasion," Giordani said without giving further details. Finance Minister Rodriguez added that the government is not planning on increasing the nearly 50% that banks have to earmark from their lending to industries like manufacturing, agriculture and tourism following government guidelines.

The weak economy is becoming a political liability for Chavez and his supporters as they prepare for legislative and municipal elections next year. Venezuela could suffer its first economic decline in 2009 in five years, a contraction that could stretch to 2010.

"The government needs to create a perception that the economy is improving," said Luis Vicente Leon, director of polling firm Datanalisis."

Hope this helps, I'll be glad to help if you need more help.

Margie