South American OPEC member Venezuela will begin a widely expected $3 billion new debt issue from Monday, Economy Minister Jorge Giordani said.

The minister added that Venezuela's payment last week of $1.5 billion in maturing bonds demonstrated the OPEC member's capacity to pay its debt.

This is something that has never stopped being done during these 10 years of Bolivarian government led by Commander Chavez, he said.

The new issue, which had been anticipated by Wall Street banks, would begin from Monday and more details would be given during the day, Giordani added on a TV programme alongside President Hugo Chavez.

This issue will be approximately $3 billion and fortunately there is sufficient liquidity in the internal market to allow its success, he said.

The issue is intended to soak up liquidity in the local bolivar currency and feed unmet dollar demand.

Central Bank director Armando Leon told state newspaper Correo del Orinoco on Saturday the bonds would be issued via the institution's new currency exchange system, Sitme, which has replaced a former unregulated forex market.


Sitme uses a complicated formula, based on dollar-denominated bond prices, to fix what is essentially a third band in Venezuela's state-controlled forex market.

The government often issues debt denominated in dollars but buyable in bolivars as an exchange-rate tool.

Venezuela's sovereign and PDVSA bonds, such as the benchmark Global 2027, are widely traded because they offer high yields for investors willing to bear what is considered a significant risk of default.

PDVSA is the state oil company.

Giordani added that Venezuela could issue more debt later in the year, as permitted in its budget.

Earlier, Chavez scoffed at analysts who say Venezuela's recession-hit economy is in meltdown.

We've touched the bottom and we are going to rise up ... like a submarine, he said.

Facing a second year of contraction, Venezuela's economy shrank 5.8 percent in the first quarter of 2010, compared with the same period of 2009.

Venezuela is likely to be the only economy in Latin America with negative growth in 2010.

Inflation slowed for the third month in a row in July -- to 1.4 percent -- but the 12-month rate remains one of the highest in the world at 30.5 percent.

Chavez said inflation should continue to grow, but that higher salaries and improved social indicators demonstrated the fallacy of saying Venezuela's economy was collapsing.

(Reporting by Andrew Cawthorne; Editing by Jan Paschal)