Exchange Agreement No. 39
Exchange Agreement No. 39, entered into by the National Executive and the Venezuelan Central Bank (VCB), was published in Official Gazette No. 41.329 of 01-26-2018 (EA39). Said Agreement contains the Rules that will Govern Transactions in Foreign Currency in the National Financial System. Find below the most significant provisions of EA 39.
Transactions in the DICOM System.-
1) The Complementary Floating Market Rate of Exchange (Tipo de Cambio Complementario Flotante de Mercado- "DICOM”) will be administered, regulated, and directed by the Auction Committee prescribed in Exchange Agreement No. 38. The DICOM transactions are carried out by means of American-type auctions of foreign currency under a flotation system, open to the private sector, in which demanders and offerors participate under the conditions established in the relevant call (arts. 7, 1, and 2).
2) The auctions will operate automatically and will cross the demand and supply bids made. Upon the closing of each act, the Auction Committee will carry out the awarding process produced by the economic/computer system and notify the results to the bank institutions in order for them to proceed to pay the results of the awarded bids on the value date indicated in the relevant call. The payment of balances in foreign currency will be made in the accounts prescribed in Exchange Agreement No. 20. The list of natural and legal persons and amounts awarded in foreign currency at each auction will be published in the VCB’s and DICOM’s web page. The rate of exchange in effect will be that of the latest auction (arts. 2, 10, and 11).
3) The natural and legal persons interested in offering or acquiring foreign currency will present their bids directly through the DICOM’s web page, and declare the reason for making the bid and the destination of the funds. The existence and availability of the funds in Bolivars and in foreign currency that support the offers or demands will be guaranteed through the freezing of the funds by the financial institutions at the time when the bids are made (Art. 4).
4) The rate of exchange in Bolivars resulting from the auction will be the lowest price proposed by the legal persons that demand foreign currency which is awarded, that is, the marginal value on the demand bids awarded to legal persons (art. 3).
5) Natural persons may acquire a maximum amount of 420 euros or its equivalent in another foreign currency during each quarter and legal persons, a maximum monthly amount equivalent to 30% of the monthly average gross income declared in the income tax in the immediately preceding fiscal year, up to a maximum of 340,000 euros per year or its equivalent in another foreign currency (art. 9).
6) Natural or legal persons acquiring foreign currency through the DICOM will apply the rate of exchange resulting from said auction as calculation base for their cost structure and other purposes (Art. 14).
Retail exchange transactions.-
7) The natural or legal persons interested in selling amounts of foreign currency equal to or lower than 8,500 euros or its equivalent in another foreign currency may do it through the authorized exchange operators, at the DICOM rate of exchange of the latest auction.
Transactions with securities in foreign currency.-
8) Brokerage and securities firms and the Bolsa Pública de Valores Bicentenaria (Bicentenaria Stock Exchange) are empowered to make, only through the Bolsa Pública de Valores Bicentenaria, transactions of trading in national currency of securities in foreign currency issued by any national or foreign private entity, which securities must be traded through public offering and in regulated markets. The institutions of the banking, insurance, and securities market sectors, the savings banks and funds, fiduciary funds, and mutual guarantee and risk capital societies and funds may not participate as clients in these transactions. Brokerage and securities firms may only acquire these securities and keep them in their own portfolio on a temporary basis, solely for purposes of these transactions. The Bolsa Pública de Valores Bicentenaria is the only one that may keep these securities as investment portfolio (arts. 17, 18, and 19).
9) The rate of exchange for transactions of sales of securities will be the one of the latest DICOM auction and for purchase of securities, it will be the same rate of exchange but reduced by 0.25%, calculated on the market value of the negotiated security or the value agreed by the parties if the security has no reference value in the country. (Art. 22)
10) The reference rate of exchange prescribed in art. 11 (DICOM of latest auction) will be applicable to all operations of payment of foreign currency of the public and private sectors and to those not expressly prescribed in EA39, which in any case must be processed through the alternative markets regulated in the exchange rules (Arts. 28 and 30).
11) The conversion of foreign currency for purposes of determining the taxable base of tax obligations derived from customs operations will be made at the rate of exchange prescribed in article 11 (DICOM of latest auction) in effect on the date of payment of the tax obligation (Art. 31).
12) The tax obligations established in special laws, as well as the rates, commissions, surcharges, and public prices fixed in foreign currency may be alternatively paid in the currency in which they are denominated, in their equivalent in another foreign currency or in Bolivars at the rate of exchange prescribed in art. 11 (DICOM of the latest auction) on the date of the transaction (Art. 14).
13) Exchange Agreements Nos. 38 and 35 were repealed, as well as all provisions conflicting with EA39, including any Resolution, Ruling or administrative act issued in the performance of the repealed Exchange Agreements (art. 37). The DIPRO protected rate of exchange prescribed in Exchange Agreement 35 was repealed. It continues to be applicable only in cases of Special Agreements executed with the National Executive in order to attend to obligations, programs, and projects of interest for national development or with a high strategic component as per the priorities defined to that end, and to honor the Republic’s foreign public debt and BANDES’ and CENCOEX’s requests for acquisition of foreign currency intended to attend to transactions connected with their purposes and which requests have been filed with the VCB prior to the publication of EA39 (arts. 23 and 24).
EA39 entered into effect on the day of its publication in the Official Gazette.
In order to access EA39, 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.”