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REPORTS: VENEZUELA |
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Currency
Controls and a Booming Black Market
Humberto
Márquez
CARACAS, (IPS) - Five months after
foreign exchange controls were adopted
in Venezuela, businesses are having a
hard time gaining access to foreign
currency and the black market is
booming, while the international
reserves are recovering.
Jorge, an economy student, had only a
small income until the currency controls
were implemented on Jan. 21. But ''since
then,'' he told IPS, ''I make contact
with people by telephone or the Internet
who want dollars or euros, and look for
others trying to sell dollars or euros,
and I'm earning between 2,000 and 4,000
dollars a month.''
The local currency, the bolivar, stands
at 1,600 against the dollar at the
official exchange rate. But Jorge pays
an average of 2,200 bolivars for every
dollar he receives in checks, 2,300 for
electronic transfers, and 2,400 if he is
able to find greenbacks.
Carlos Dorado, the president of
Italcambio, a local chain of exchange
bureaux, commented to IPS this week that
''The price of the dollar is set by four
or five individuals who sell an
apartment or other asset abroad, decide
to bring back the money, and say 'Here
are 100,000 dollars, at such-and-such a
price, who wants them?' That's the price
of the day, whether 2,500 or 2,700
bolivars.''
Oil accounts for approximately
one-fourth of Venezuela's 100 billion
dollar Gross Domestic Product (GDP), and
more than 85 percent of the country's
foreign exchange earnings.
Last year, the rest of the economy
required 1.1 billion dollars a month,
more than 90 percent of which came from
the Central Bank, which in turn obtained
foreign currency from the oil industry.
''Last year, the Venezuelan market
needed 45 to 50 million dollars a day,
and only four to five million a day are
now available,'' said Dorado. ''If we
continue along this route, the only
options open to companies will be to use
up their savings, turn to an
increasingly expensive black market, or
simply close their doors.
''The only people who exchange dollars
at Italcambio at the official rate of
1,600 bolivars are people who are
legally unable to turn to the black
market, like diplomats,'' he said. ''But
not a single one of the European
pensioners whose checks we cash has
given us the stub for us to exchange the
check at the official rate.''
Italcambio, which has 50 branch offices
and 900 employees, had the corner on 85
percent of the retail market for foreign
exchange, and racked up average earnings
of 500,000 dollars a month.
But ''that is the amount I have lost
every month since February,'' said
Dorado. ''I have set a December deadline
for myself. If things continue like this
until then, we're closing.''
Valentina Quispe, a Peruvian immigrant
who sells clothes in Caracas, told IPS
that she used to send her family 300 to
400 dollars a month, but that now it was
very difficult to gain access to dollars
or to save up enough bolivars to
purchase them, and for that reason she
now sends ''clothes, toys and other
products.''
Roberto León, a shop employee in the
state of Zulia in northwestern
Venezuela, on the border with Colombia,
told IPS that he and his family purchase
dollars in the northern Colombian town
of Maicao, ''although it's dangerous,
because we could be robbed, and there is
also the risk of buying counterfeit
dollars.''
The exchange controls were adopted
towards the end of a 63-day general
strike launched in December by the
Fedecamaras business association, the
country's main trade union, and
thousands of managers of the state-run
oil industry, in an attempt to topple
populist President Hugo Chávez.
The stoppage cost the country an
estimated 10 billion dollars, including
six billion dollars in oil industry
losses.
During the two-month walkout, capital
flight led to a shrinking of the
country's foreign reserves from 16
billion dollars in November to 13.9
billion dollars by Jan. 21, when the
government declared a temporary freeze
on foreign currency trading.
That day, the bolivar was trading at
1,717 against the dollar, nearly double
the rate seen one year earlier. As of
February, the government fixed the
bolivar at 1,600 to the dollar, and
created a Foreign Exchange Control
Administration (CADIVI).
The country's reserves have rallied, to
nearly 17.5 billion dollars as of Jun.
20, the Central Bank reported. But in
May, Deputy Minister of Production Víctor
Alvarez said the international reserves
would have to rise to between 18 and 20
billion dollars before the controls
could be lifted.
Chávez said there would not be ''a
single dollar for the coup- plotters,''
as he describes those who organised the
general strike.
But CADIVI, the foreign exchange
regulatory body, designed a scheme by
which foreign currency is made available
to those who meet a series of requisites
and can demonstrate solvency. However,
private companies complain that the
conditions are difficult to meet, and
that the procedure is complex and
cumbersome.
''The government has imposed a
five-month exchange rate shutdown, and
is now preparing a major devaluation
that will drive more businesses under
and generate more unemployment,'' said
the vice-president of Fedecamaras, Albis
Muñoz.
Economist Pedro Palma, who is opposed to
Chávez, said the currency controls
''asphyxiate the economy, because they
are ineffective and in practice amount
to a confiscation of foreign exchange by
the government.''
According to Dorado, ''in the past five
months, only 69 million dollars have
been issued to importers, and it is
impossible for an economy of which
two-thirds depends on imports to
function this way.''
But the president of CADIVI, Edgar Hernández,
said 6,800 applications for foreign
exchange for imports were approved, and
594 million dollars were issued,
including 72 million for the car
industry, 60 million for the health
system, and 3.2 million for students
studying abroad.
Finance Minister Tobías Nóbrega said
''companies have understood that if they
meet the requisites and go through the
correct channels, the dollars are
issued, and there are no negative
consequences.''
''Things are definitely getting
better,'' said the Caracas director of
U.S. agribusiness giant Cargill.
But the Latin America head of the
U.S.-based international consumer goods
company Procter & Gamble said ''we
have accumulated a high level of unpaid
accounts'' in Venezuela, ''and that
cannot continue on for long.''
Nóbrega, whose ministry took the reins
of CADIVI this week, said it was
studying a mechanism for levying a tax
on foreign currency trading, in exchange
for a relaxation of the controls,
''although we can't just lift the
controls overnight.''
Palma and Dorado acknowledged that the
abrupt removal of the currency controls
could trigger a run on the banks, due to
the built-up demand for dollars. They
both suggested a gradual transition
process.
But for now, the government is using its
own foreign exchange to directly import
essential food items like flour, sugar,
rice, chicken and beef, which it mainly
distributes through a network of
''people's markets'' that operate under
the supervision of the armed forces.
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