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EXCHANGE AGREEMENT NO. 38

Exchange Agreement No. 38, issued by the National Executive jointly with the Venezuelan Central Bank ("VCB"), was published in Official Gazette No. 6.300 Extraordinary of May 19, 2017 ("EA38").  Below is a summary of the most important aspects of EA38:

 

.-The Auctions: 

  • EA38 creates a system of auctions controlled by the VCB for the purchase and sale of USD. This new system, also called System of Foreign Currency with Complementary Floating Market Rate of Exchange (Sistema de Divisas de Tipo de Cambio Complementario Flotante de Mercado - “DICOM”), replaces the preceding  DICOM/SIMADI system and will complement the exchange transactions with Protected Rate of Exchange (Tipo de Cambio Protegido - “DIPRO”) intended exclusively for the granting of foreign currency by CENCOEX for importation of food and medicines (Exchange Agreement No. 35).   

  • The auctions of foreign currency at DICOM may be carried out with positions maintained by natural and legal persons of the private sector and by the VCB.

  • The Social Development Bank (Banco de Desarrollo Social  - “BANDES”), Petróleos de Venezuela, S.A. (“PDVSA”) and its affiliates, the mixed companies engaged in hydrocarbon matters, and any other authorized agency or entity of the public sector may participate only as offerors.

  • The auctions of foreign currency will operate automatically and they correspond to a flotation system administered within monitored moving bands announced by the VCB.  The value to be paid by each demander of foreign currency will be equivalent to its offer for acquiring the same, regardless of the resulting rate of exchange.

  • The auctions may be regular auctions or contingent auctions. Regular auctions are directed to all sectors; natural or legal persons may participate in the same with no restrictions other than those established in each call. Contingent auctions will be held when an ordinary auction, because of excess demand or supply, fails to award the foreign currency requested within the moving band established; priority will be established in the participation. At contingent auctions, priority may be given to economy sectors according to previously defined criteria. If the awarding is not made, a ramdom procedure will take place.

  • The rate of exchange will fluctuate in the range established within the monitored band defined. Its value in Bolivars will be the lowest price offered by the demanders of foreign currency awarded. Said value will be the calculation basis for determining the price of the bids of foreign currency offered.

  • The natural or legal persons that wish to participate in the auctions must present their bids directly through the web page www.dicom.gob.ve. They must also: (i) declare the origin and destination of the funds; (ii) guarantee their counterpart funds in accounts maintained with authorized financial institutions; (iii) indicate their account in foreign currency with the national banking sector, according to the provisions of Exchange Agreement  No. 20.

  • The participation as offerors of the agencies and entities of the public sector in the DICOM Foreign Currency System will be governed by the authorizations given by the National Executive.

  • Payment for the bids awarded will be made by the VCB on the value date indicated in the relevant call. 

  • The rate of exchange in effect will be the one of the last auction made and will be published in the web page of the VCB.

  • The minimum amount per bid in each auction will be determined in the relevant call published.

 

.-DICOM Foreign Currency System:

  • The DICOM Foreign Currency System will be administered, regulated, and directed by the Foreign Currency Auction Committee, composed of three (3) members.

 

.-Natural and Legal Persons:

  • Natural persons may acquire at the DICOM a maximum amount of USD 500.00 during each calendar quarter.

  • Legal persons may acquire on a monthly basis up to 30% of the average monthly gross income restated and declared for Income Tax purposes in the immediately preceding fiscal year, up to a maximum amount equivalent to USD 400,000.00.

  • The legal persons that require it may demand amounts of foreign currency in excess of USD 400,000.00 after a request made from the Auction Committee. Said requests will be up to a maximum of USD 9,600,000.00 per annum.

  • The legal persons awarded through the DICOM Foreign Currency System will use the rate of exchange resulting from each auction as calculation basis for their cost structure and other purposes.

  • The legal persons that use foreign currency not acquired through EA38 in order to import raw material, consumables, intermediate and end goods for their productive process, must notify it to the Foreign Currency Auction Committee for purposes of their recording and entering in the accounts. The rate of exchange for their cost structure will be the DICOM rate of the last auction by the recording date.  The Foreign Currency Auction Committee will issue the relevant certificate.  

  • The natural and legal persons interested in making transactions of sale of foreign currency for amounts equal to or lower than USD 10,000.00 may do so through the authorized exchange operators to the VCB. The DICOM rate of the last auction will be the calculation basis for such transaction.

 

.-Final and Repealing Provisions:

  • The following are repealed: (i) Exchange Agreement No. 33 (“EA3”), except for articles 8, 10, 11, 13, 14, and 16 to the extent applicable; (ii) article 17 of Exchange Agreement No. 35; and (iii) all provisions conflicting with EA38.

  • The transactions agreed according to EA33 prior to the entry into force of EA38 will be paid in accordance with the provisions of EA33.

 

 EA38 will become effective upon publication in the Official Gazette.

 

In order to access EA38, please click here.

 

“NOTE: THIS INFORMATION SHOULD NOT BE CONSTRUED AS LEGAL ADVICE ON ANY SPECIFIC MATTER AND ITS CONTENT ARE INTENDED AS A MANAGEMENT ALERT AS TO CURRENT DEVELOPMENTS IN VENEZUELA, ANY SPECIFIC LEGAL QUESTIONS REGARDING THE POSSIBLE APPLICATION OF NEW OR PROPOSED LEGISLATION TO PARTICULAR SITUATIONS SHOULD BE ADDRESSED TO TRAVIESO EVANS ARRIA RENGEL & PAZ.”