Friday, April 15, 2011
Venezuelan Exchange Policy Troublesome for Many
WSJ: In Venezuela, Popular Websites Track Black Market in Currency
Many Venezuelans are unable to exchange Venezuelan bolivars for United States dollars to import necessary American products. In May 2010, in a move to encourage domestic production and consumption, Venezuelan president Hugo Chavez banned private currency trading and required banks to use a state-run exchange market. Since then, individuals have to apply to the government to exchange currency, but most are turned down because Chavez wants Venezuelan money to stay within Venezuelan borders. Trading outside of the government system is illegal. In a country that relies heavily on imports, many Venezuelans are trying to find ways around this strict and troublesome exchange system.
Some Venezuelans travel to neighboring countries, like Colombia, to exchange their money. They often travel hundreds of miles every week to exchange currency and purchase supplies from the United States for their businesses. However, through this system, Venezuelans only get about half the dollars for what the bolivars are supposed to be worth according to the government’s official exchange rate. The Venezuelan government offers 4.3 bolivars per dollar whereas the exchange rate in Colombia is around 8.3 bolivars per dollar. Venezuelans accept the low value in Colombia because the government almost always denies applications for currency exchange. In fact, numerous websites have been designed specifically to track the exchange rate of bolivars in nearby countries. These websites are based in other countries so that Venezuelan governmental control is nearly impossible.
Other Venezuelans participate in a black market exchange of bolivars. In fact, about 11 percent of the country’s imports are purchased on the black market. Exchange of currency used to occur legally through electronic transfer by banks. In this system, Venezuelan importers sent bolivars electronically to traders. The traders then sent the dollars to the American companies to export the products to Venezuela. Chavez banned this trading, but the electronic transfers did not necessarily stop. However, the government is cracking down on the black market. In April 2011, the Venezuelan Attorney General charged 10 brokerage houses with participating in the black market.
While there are methods of getting around the government exchange system, many Venezuelans are finding it too difficult. One Venezuelan who owns a medical clinic and imports equipment from the United States is thinking of selling his clinic and moving out of the country instead of continuing to take trips to Colombia to exchange currency. Although Chavez’s policy attempts to encourage domestic consumption, it appears that it may have the opposite effect and push some to take their business out of Venezuela.