Socialist Maduro seeks to raise dollars with appeal to greed

CARACAS, Venezuela — When Jose Humberto Vivas needs to trade dollars for Venezuelan bolivars, he usually flouts the nation’s rigid exchange controls by turning to illegal currency traders.

But last week, Vivas put a few hundred dollars in his wallet and headed to an exchange house regulated by Venezuela’s socialist government, lured by the seemingly improbable prospect of an official rate that is more inviting than the black market rate.

“I haven’t been here in years,” Vivas said as he stood in line outside Italcambio, a normally lifeless exchange house in downtown Caracas protected by tinted windows and an armed security guard who inspects customers’ IDs.

“There’s a long wait here . and it takes days to get the money transferred to your account, but it might be worth it,” said Vivas, who makes a living from selling dairy products.

Little noticed amid the turmoil unleashed by the opposition’s renewed push to oust President Nicolas Maduro, Venezuela’s central bank devalued the country’s currency on Jan. 28 by 50 per cent, eclipsing the parallel black market rate.

The government now buys $1 for 3,303 bolivars, while the informal market buys them at 3,120 bolivars, according to the website DolarToday. It is the first time the official exchange rate has been higher than that of the black market since currency controls were put in place more than a decade ago, analysts said.

The controls were implemented in 2003 by Hugo Chavez, the late president who initiated Venezuela’s socialist system, and have frequently made the simple task of exchanging money into a stressful ordeal that involves searching for illegal currency dealers, logging into websites banned by the government, and sending wire transfers to foreign banks.

But as Maduro’s government runs out of hard currency amid an onslaught of international pressure and economic sanctions, it is tacking in a markedly capitalist direction, encouraging Venezuelans to sell their greenbacks to the local financial system.

In a statement issued Jan. 29, the Central Bank described the devaluation as an economic stabilization measure aimed at controlling hyperinflation by undermining the black market.

Analysts called it a desperate gambit to raise hard cash in a country now beset by severe U.S. oil sanctions that could cost the government up to $11 billion in revenue over the next 12 months. Without one of its most important sources of income, Venezuela will be hard-pressed to purchase food and other imports, potentially worsening shortages and deepening its economic collapse.