NEW CENTRAL BANK LAW IN EFFECT

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