(Adds context, analyst quote)
By Eyanir Chinea
CARACAS, May 31 (Reuters) - Venezuela’s central bank said on Wednesday that the exchange rate of its new Dicom currency auction system was 2,010 bolivars per dollar, a steep devaluation from the previous rate of around 728 bolivars.
The first auction saw some $24 million sold off, a low amount that suggests that this new mechanism will again fail to assuage demand for greenbacks in the crisis-hit OPEC nation.
Dicom is designed as another addition to the oil-rich country’s complex currency controls, the fifth such plan in four years by a socialist government that has repeatedly balked at revamping its crumbling, state-led economic system.
Complex currency controls, first enacted in 2003 to prevent capital flight, are seen as one of the main causes of Venezuela’s economic crisis. The crisis has left millions suffering food and medicine shortages, as it restricts imports and spooks investors.
Opposition leaders also say the major rate differentials foment corruption, as those with access to favorable rates can easily resell dollars for a handsome profit.
For those shut out of the system, a vibrant black market has popped up. There, a dollar fetches over 6,000 bolivars - a far cry from the new Dicom rate, despite the devaluation.
The new rate is not expected to change any of the fundamental distortions in the economy heaving under a fourth year of recession and triple-digit inflation.
“Supply to the Dicom system will also remain constrained, given the government’s limited liquidity and restrictions on participation,” the Eurasia political risk consultancy said in a note to clients.
“Thus, overall, the new market will likely be very similar to previous foreign exchange systems (Sicad, Sicad 2, Simadi, etc...) that will allow the government to maintain a high degree of discretion in FX allocation but also fuel politically sensitive distortions.” (Additional reporting by Diego Ore; Writing by Alexandra Ulmer; Editing by Chizu Nomiyama and Jonathan Oatis)