Caracas, March 28, 2017 (venezuelanalysis.com) – Venezuelan President Nicolas Maduro announced Tuesday a string of new economic measures aimed at promoting domestic production amid a deep recession triggered by the collapse of global oil prices. The measures were unveiled at the government’s Venezuela Powerhouse Expo 2017 in Caracas, where public and private firms have been showcasing their productive achievements over the past several days.

New exchange rate mechanism

In the first place, the head of state revealed that his administration will revamp the country’s floating exchange rate mechanism known as the DICOM. Beginning next week, the government will now auction off state dollars to the private sector two times per week in a bid to streamline access to financing for imports and investment.

“I have decided to activate beginning next week a new model of DICOM that allows the medium term building and perfecting of a system that will in the short term provide access to foreign currency for all productive sectors and all Venezuelans,” he declared.

The foreign currency to be auctioned will be provided by state enterprises, although the executive is also calling on private firms, especially exporters and banks, to place their dollars on the market as well.

The measure is the first modification to the country’s complex currency exchange system announced since the government instituted the floating DICOM alongside the fixed DIPRO rate last year.

While the DICOM initially surged from 200 to over 600 in its first months of operation, it has since remained fixed at approximately 700 bolivars to the dollar, which analysts have attributed to the lack of availability of government dollars to satisfy demand. Meanwhile, the black market rate has skyrocketed from 1000 bolivars to the dollar in October to around 3000 in recent months.

Import substitution

In a second move, Maduro unveiled the creation of the National Productive Center of Innovation, Technology, and Import Substitution, which will reportedly be charged with coordinating the progressive replacement of imports with nationally produced goods. The new institution will be headed by Bicentennial Bank President Miguel Perez Abad, though further details have yet to be made available.

In response to the crash of global crude prices – the source of over 90 percent of the country’s export earnings – the Maduro government has moved to dramatically slash imports over the previous three years.

According to the private financial firm Torino Capital, January 2017 imports fell by USD $800 million, marking a 73.9% decline with respect to 2012 and a 23.5% drop in comparison to last year.

While the firm notes an ongoing fall in imports from neighbors such as Brazil and Chile in February, it also highlights a 76.3% increase in imports from China, which now stand at their highest point since October 2015. The development points to the government’s ongoing access to credit from Beijing, which it is using to substitute other imports for Chinese goods.

All in all, Torino Capital calculates that Venezuelan imports have reached their lowest point since the firm began collecting data in 2007.

New executive decrees to attract foreign investment

Maduro additionally signed seven new executive decrees to promote mixed public-private investment in mining and agricultural production.

In one of the decrees, the head of state declared diamonds, copper, and silver to be strategic metals, following a similar designation issued with respect to gold and coltan last year.

Maduro also granted a permit to the mixed firm Mining Harvest, jointly owned by the Venezuelan state and Canadian transnational Gold Reserve Inc., to exploit the copper reserves in the Sinfontes municipality of Bolivar state.

The initiative forms part of the government’s controversial Orinoco Mining Arc, under which Maduro has authorized open pit mining in 112,000 square kilometers of the mineral-rich southeastern Amazonian state of Bolivar.

The president additionally signed two more decrees approving tax exemptions for imports realized by public institutions in the area of food production. According to Agriculture Minister Wilmer Castro Soteldo, the measure will increase the total cultivated land in the vegetable sector to over 4 million hectares, while the fishing sector will likewise expand to 17 million hectares.

Vice-President Tareck El Aissami has indicated that the objective of the executive decrees is to reduce “disperse” legal mechanisms that obstruct foreign investment in the country.

“Whoever wants to invest will have all their rights guaranteed under the comprehensive protection of direct investment,” he stated.

The full text of the executive orders will reportedly be published in the National Gazette in the coming days.

48 deals with private firms to jumpstart production

During the Venezuela Powerhouse Expo, the national government also announced that it had signed 48 agreements with private companies in 17 areas.

In the area of food production, the government signed a deal with the national firm Agropecuaria Tierra de Agua to boost the production and distribution of animal food processed domestically at the company’s factory in Altagracia de Orituco in Guarico state. The Maduro administration also brokered an agreement between the firms Concentrados Agrícola C.A. and Agropecuaria El Palota for the production and commercialization of eggs.

The government also entered into agreements with various private firms for the expansion of tourism in collaboration with the Ministry of Tourism and the VENETUR Hotel Network.

Additionally, Maduro signed deals with various shoe producers, including Eles y Afines Shoe Conglomeration, Representaciones 00306, Short Sport, Colme Shoe Factory, and Zone Three International, for the production of 500,000 pairs of shoes in the country.

Likewise, in the area of mining, the Ministry of Ecological Mining signed a deal with the firm Geomatick Consultants, C.A. for technical assistance in the certification of mineral deposits.

The government also approved a series of agreements with representatives of the plastic industry in order to increase production in the country, including state-owned Venezuelan Petrochemical (PEQUIVEN), the Venezuelan Association of Chemical and Petrochemical Industry (ASIQUIM), the Venezuelan Association of Plastic Industries (AVIPLA), and the small business lobby, FEDEINDUSTRIAS.

In the communal sector, the Maduro administration signed a letter of intention with a host of socially productive enterprises, including the ConstruVivienda Commercial Society, the Artisanal Products Distributor (DIPRACA), the Ruansa Industry Commercial Society of Venezuela, the Bolivarian Chamber of Painting and Construction, the Bolivarian Chamber of Communal Construction, and the Phoenix Cooperative of Aluminum Workers (ALUMIFENIX).

The government also reached agreements with several auto manufacturers to expand access to dollars for imports of crucial materials for domestic assembly as well as substitute 25% of imported parts with those produced nationally.

Finally, Maduro signed accords with a number of national and transnational firms to provide personal hygiene and maternal care products to the government’s Local Production and Provision Committees (CLAPs), which distribute food and other essential items directly to communities.

Among the firms participating in the partnership are Nestlé Venezuela, Heinz Venezuela, the National Absorbents Conglomerate, Cacique Maracay, the Venezuelan Hygiene, Chemical, and Paper Corporation, Colgate Palmolive C.A., and Proctor & Gamble.

During the exposition, Maduro additionally revealed his government’s plan to grant USD $25 million in credits to public and private firms via the Foreign Commerce Bank (BANCOEX) in order to promote production in the country.

“Today we are giving out $25 million dollars in financial credits for the expansion of productive capacities,” the president declared.

The list of recipients of the financing has, however, yet to be made public.

In total, 481 companies participated in the Venezuela Powerhouse Expo, of which 14% are public enterprises, 36% mixed capital, and 50% private.