The local currency has weakened 6.4 percent this year to 9.23 per dollar, after falling to a record low 9.27 on June 5, according to the blog Lechuga Verde, or Green Lettuce, which cites traders. Individuals seeking to buy U.S. currency consult websites and Twitter accounts that call money Fresh Avocado or Your Benjamin, a reference to Benjamin Franklin, whose face appears on the $100 bill. The government prohibits local newspapers and broadcasters from mentioning the black-market exchange rate.

The bolivar, pegged at 4.3 per dollar for “priority” imports, is sinking the most this year since President Hugo Chavez shut a government-endorsed unregulated market in May 2010, citing the potential for money laundering. With inflation topping 20 percent a year and oil, the source for 95 percent of export revenue, falling, the government has reduced sales of dollar bonds used to access foreign currency. The move is spurring speculation that the next government will devalue the bolivar, regardless of who wins October presidential elections.

“The government is dead-set against giving dollars for capital flight,” Boris Segura, a strategist at Nomura Holdings Inc., said by phone from New York. “If they don’t get their act together in terms of irrigating more dollars in the currency market, this is bound to weaken more.”

‘Priority’ Imports

As part of controls to keep dollars in the country, Chavez, who is battling cancer as he seeks re-election in October, pegs the bolivar at 4.3 per dollar for “priority” imports such as food staples, medicine and machinery. The government sets a rate of 5.3 per dollar for goods it deems non-essential. Authorized buyers at the 5.3 rate obtain the U.S. currency through a central bank-run market that provides dollars through the trading of bonds.

Venezuelans who can’t get government approval to purchase dollars at those rates turn to the black market. Higher-end retail items that aren’t regulated such as whisky, clothing and cars are priced at that rate, helping fuel inflation.

The outlook for government revenue is worsening as oil prices drop. Crude has fallen about 22 percent in New York since reaching a peak this year of $109.77 a barrel on Feb. 24.

The bolivar has weakened in the unregulated market more than any official exchange rate inLatin America this year, except Brazil’s real, which is down 8 percent against the dollar.Argentina’s peso has dropped 23 percent in the country’s so-called blue-chip market used to skirt currency controls.

No Bonds

Venezuela has sold no dollar bonds this year after issuing a record $7.2 billion of the securities last year to meet foreign-currency demand and finance government spending.

A Finance Ministry official declined to comment. The central bank’s press department didn’t return an e-mail seeking comment.

Individual investors seeking to purchase the dollar securities are increasingly being squeezed out of the primary market. During the October sale of $3 billion of bonds, individuals and companies putting in the minimum order of $3,000 were only allocated $1,500 each.

Local investors were also left out of a dollar bond sale by Petroleos de Venezuela SA last month, when the state oil company decided to raise money in a private placement with the central bank and public banks.

Cancer Recurrence

When permitted, locals buy dollar bonds from the government and PDVSA, as the oil company is known, at face value in bolivars at the official rate of 4.3 per dollar and sell them to investors abroad in dollars at a discount. The bonds due in 2026 that were sold in October began trading at 75 cents on the dollar when they debuted in secondary markets. The 11.75 percent securities traded at 90.63 cents today at 11 a.m. in Caracas, according to data compiled by Bloomberg.

Chavez, whose presidency began in 1999, has cut back on his public appearances since a cancer recurrence in February. His illness has caused delays in economic planning, an example of government “disorganization,” according to Francisco Rodriguez, an economist at Bank of America Merrill Lynch in New York.

Venezuelan dollar bonds yield an average 12.43 percent, the third-highest among emerging markets tracked by JPMorgan Chase & Co.’s EMBI Global index, behind Belize and Argentina. Investors demand an extra 1,077 basis points, or 10.77 percentage points, in yield above U.S. Treasuries partly because the government is dependent on oil for access to dollars and afterforeign- currency reserves fell 39 percent since the beginning of 2009 to $25.77 billion.

‘Large Devaluation’

Investor expectations of a devaluation following the October elections are also increasing dollar demand and weakening the bolivar in the unregulated market, Juan Pablo Fuentes, an economist at Moody’s Economy.com in West Chester, Pennsylvania, said in a report.

“Tight capital controls, falling international reserves, and expectations of a large devaluation soon after October’s presidential elections have pushed the currency measurably lower in recent weeks,” Fuentes wrote. “After October, expect the government to implement a large devaluation, as hard currency becomes more scarce.”

Inflation running over 20 percent a year is eroding the value of the government’s dollar revenue, leading to growing budget deficits and creating pressure on Chavez to devalue, according to Asdrubal Oliveros, an economist at Caracas-based research and consulting firm Ecoanalitica.

“Devaluations in Venezuela are primarily driven by fiscal needs,” Oliveros said.

Legal Concerns

Chavez, who installed currency controls in 2003 and maintained a peg of 2.15 bolivars per dollar from 2005 until 2010, has devalued the currency twice in two years. The government may devalue about 28 percent to 6 per dollar later this year, according to Fuentes.

Corporations, which were using the market to repatriate dividends, no longer participate in the black market out of concern over legal ramifications, according to Ecoanalitica.

Since the closing of the so-called parallel market in May 2010, unregulated trading has dropped about 80 percent to between $18 million and $25 million a day, Ecoanalitica economists Oliveros and Jose Luis Saboin wrote in a February report. The bolivar traded at about 8.3 per dollar when Chavez shut down the parallel market in 2010.

‘Under Control’

Central bank President Nelson Merentes, who set up the government-run currency marketknown as Sitme in June 2010, told Chavez the black market rate is “under control” when asked about the rate on Aug. 17 last year during a national broadcast. In the Sitme market, buyers get the 5.3 per dollar rate.

Venezuelans buy dollars on the black market either by exchanging cash or sending a transfer to banks outside the country. While this is illegal and can lead to imprisonment, people find ways to sidestep the controls, Segura said.

Individuals can also exchange bolivars for Colombian pesos in the border city of Cucuta and then convert pesos into dollars. That implicit rate is closer to 9.60, according to Lechuga Verde.

“Where there’s a will, there’s a way,” Segura said.