The Central Bank of Venezuela (BCV, for its acronym in Spanish) published a resolution on March 10 which ties the value of the Single National Productive Portfolio, created in late January by a law passed by the National Constituent Assembly, to fluctuations in the official exchange rate. The initiative also applies to microcredit, with the exception of credit card loans and payroll loans. Venezuela is gradually moving towards the dollarization of its economy. The regulations are already in force.
The Productive Portfolio is for Venezuelan food producers and manufacturers seeking preferential loans to boost profits. Following the BCV resolution, such loans will be expressed in terms of a Productive Credit Value Unit (UVCP, for its acronym in Spanish), which will be established taking into account the variation of the market reference rate. Meanwhile, the interest rates of the loans will range from 4% to 6%, with a default rate at 0.5%.
Due to the country’s severe economic situation which is ongoing since 2017, and the fragility of the national currency, the dollarization of various financial market mechanisms is becoming increasingly common, as is the use of dollars in everyday transactions. Against this background, the Executive branch recently issued a regulation governing the issuance of debt securities in foreign currency.