VENEZUELA TIGHTENS FOREIGN EXCHANGE RESTRICTIONS Venezuela's central bank has ordered Venezuelan banks and exchange houses to cease foreign exchange operations with brokers based outside the country, according to a copy of a central bank telex made available to Reuters. The measure, confirmed by a brokerage firm here, has effectively cut off all foreign participation in Venezuela's volatile currency market. The telex, issued on May 19, was signed by Carlos Hernandez Delfino, manager of the bank's department of international operations. The telex said the restriction on business with foreign brokers is in line with an earlier measure prohibiting foreign exchange houses from selling dollars or other foreign currencies to anyone living outside Venezuela. In recent weeks the Venezuelan government has denied rumours that it intends to impose foreign exchange controls to prop up the weakening bolivar. But brokers said the central bank's move is seen as a de facto currency control. "It is definitely a control in the sense that there's no longer complete freedom to operate," one broker here said. "Gradually they're imposing restrictions and the direction is towards complete control," the broker said. The broker, who requested anonymity, said virtually all his Venezuelan customers had stopped doing business with him since the central bank issued the telex and followed it up with telephone calls. He said that before the restriction was imposed the volume of his firm's transactions with Venezuela was about 10 mln dlrs a day. "It was a frenetic market, it was really quite active," he said. The broker said he saw no logical explanation for the prohibition because his firm only acted act as an intermediary between Venezuelan brokers, exchange houses and banks. "We weren't buying dollars from Venezuelans, that's ridiculous," he said. "They've been on a rampage against foreigners." The broker noted that two months ago Venezuela's central bank quietly announced that banks doing foreign exchange business outside Venezuela would have to respect a new 200 pct reserve requirement. In February, the central bank also prohibited trading in bolivar futures, the broker said. "We used to have a forward market," he said. "For a small currency it was miraculous." He said the bolivar, which averaged 20.29 to the U.S. Dollar in 1986, would continue to slip from its current range of 28.35 to 28.50 because the central bank was rapidly running out of foreign reserves to support the currency on the free market.