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Cablegate: New Central Bank Law in Effect

VZCZCXRO3738
PP RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHMT
RUEHNG RUEHNL RUEHQU RUEHRD RUEHRG RUEHRS RUEHTM RUEHVC
DE RUEHCV #1432 3131922
ZNR UUUUU ZZH
P 091922Z NOV 09
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC PRIORITY 3955
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RHEBAAA/DEPT OF ENERGY
RHEHNSC/NSC WASHDC
RUMIAAA/HQ USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE
RUEATRS/DEPT OF TREASURY

UNCLAS CARACAS 001432

SENSITIVE
SIPDIS

ENERGY FOR CDAY AND ALOCKWOOD
HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR MKACZMAREK
NSC FOR DRESTREPO AND LROSSELLO
USDOC FOR 4332 MA/ITA/WH/JLAO

E.O. 12958: N/A
TAGS: ECON EFIN VE
SUBJECT: NEW CENTRAL BANK LAW IN EFFECT

RF: CARACAS 1390

1. (U) The modified Central Bak (BCV) law we reported on
previously (reftel) was published in the Official Gazette
dated Novembe 5 and is now in effect. There are several
diffrences between the actual law and what we reported
which was based on the draft approved by the Naional
Assembly in first discussion. (Note: Draf laws can be
modified during second discussion i the National Assembly,
and perhaps even after te discussion and before printing.
Access to infomation about modifications in these phases is
liited. End note.) The most important difference isthat
in the actual law, as opposed to the draft,bonds issued by
Venezuelan state entities cannotcount as international
reserves. A provision inthe draft law that would have
required Fonden totransfer hard currency back to the BCV if
the BC's reserves fell below the "adequate level" was
removed, as was another provision requiring PDVSA to seek an
opinion from BCV and the Ministry of Economy and Finance
before issuing bonds.

2. (SBU) Comment: Our comments given in reftel still stand,
with the exception that the actual law gives the BCV less
scope for putting at risk the quality of its international
reserves than the draft law did. The proximate PDVSA bond
issuance, which the Minister of Energy and Petroleum
suggested will take place before year's end, will be a test
of the extent to which the BCV and Venezuelan government
intend to use the new BCV law to finance PDVSA (and other
government entities) and to have the BCV intervene in the
parallel foreign exchange market. End comment.
DUDDY

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