The exchange agreement allows individuals and legal entities to participate as bidders and applicants in the process of foreign exchanges auctions.
In the Official Gazette 6,300 Extraordinary dated May 19, 2017, the Exchange Agreement 38 was published (the “Exchange Agreement”), which establishes the mechanism by which the system for the allocation of foreign currency will operate through the Currency Exchange System of Complementary Floating Market Exchange (“DICOM”) and Resolution No. 17-05-01 of the Central Bank of Venezuela (“BCV”) by which the Committee of Foreign Exchange Auctions is created.
The DICOM will be administered, regulated and directed by the Foreign Exchange Auction Committee composed of 3 members appointed by the Board of the BCV. Among the functions of the Auction Committee are (i) to announce the call for auctions of the DICOM, (ii) to establish the conditions and requirements for participation in each auction, (iii) to define the methodology for awarding positions in auctions, (iv) determine the mechanisms for the monitoring and evaluation of the liquidation of auction operations and, (v) dictate general rules of the DICOM.
The Exchange Agreement establishes that individuals and legal entities of private law may participate as bidders and as applicants in the process of foreign exchange auctions. The legal entities of public law, the Bank for Economic and Social Development (“BANDES”), Petróleos de Venezuela, its subsidiaries, joint ventures dedicated to hydrocarbons, as well as all bodies authorized by the President of The Republic may participate in the currency auctions as bidders.
National public companies may participate as foreign exchange applicants in accordance with the provisions of Decree 2.777 published in Official Gazette No. 41,119 of March 22, 2017; which must maintain such currencies in the BCV or in the BANDES.
According to the Exchange Agreement two types of auction will be carried out, one ordinary and one contingency. The first will be the one open to all sectors, in which both the applicants and the bidders of foreign exchange can participate in compliance with the conditions established in the call.
The contingency auction will take place when, due to excess demand or supply reasons, the currencies are not allocated according to the band system. In this case, the contingency auction will prioritize the participation of the applicants and the bidders according to criteria linked to the sector, activity or products that are defined in the call.
The minimum quantity by position of demand and supply will be determined in the call that is published by the Committee of Auctions of Currencies. Participation in the DICOM auction must be done through the page www.dicom.gob.ve, where they must also declare the cause that gives rise to the request, as well as the destination of the funds.
Legal entities may acquire monthly a maximum equivalent to 30% of the monthly average updated gross income declared in the Income Tax in the immediately preceding fiscal year, but may not exceed the equivalent of US $ 400,000. In case that legal persons wish to formulate applications, must be registered in the system through the web portal and fill out an application which will be answered by a special committee designated for such request by the Foreign Exchange Auction Committee.
Likewise, it is established that, once the position of the foreign exchange applicant has been taken, the amount of foreign exchange equivalent to the proposal made, regardless of the exchange rate resulting from the specific auction, will be awarded.
If a legal entity is adjudicated through the DICOM, they should apply as a basis for calculating their cost structure the exchange rate resulting from the auction in which the currencies were awarded. In the event that a legal entity uses its own currency for the import of goods and services, they must notify the Auction Committee and account for their cost structure the current exchange rate of the DICOM for the day of registration of the system.
The awarded positions will be settled in accounts in foreign currency in the national financial system. The exchange rate corresponding to each auction, as well as the list of persons awarded will be published in the web portal. The current exchange rate will be that of the last auction.
The participation of the exchange operators in the DICOM will be regulated in the respective Exchange Agreements and the joint authorizations of the Ministry of the Popular Power of Economy and Finance and the BCV.
Legal entities interested in selling more than US $ 1,000 amounts may do so through exchange operators.
Were appointed as members of the Auction Committee Pedro Rolando Maldonado Marín, who will be its president, Sohail Nomardy Hernandez Parra and Dante Rafael Rivas Quijada.
The Exchange Agreement repeals Exchange Agreement No. 33 of February10, 2015 except for articles 8, 10, 11, 13, 14 and 15 relating to retail transactions. Likewise, Article 17 of Exchange Agreement No. 35 of March 9, 2016 is repealed.
This Legal Report represents an overview of the relevant aspects of the Exchange Agreement N° 38 and does not constitute a legal opinion to address a specific situation. In case of questions, comments or if you require more information, please contact Juan José Delgado (firstname.lastname@example.org) y/o María Cecilia Rachadell (email@example.com).
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