Venezuela announces easing of currency controls, economists skeptical

CARACAS, (Reuters) - Venezuela yesterday eased 15-year-old currency controls, decreeing that private banks and exchange houses are allowed to sell dollars, but economists are skeptical the measure will improve the dysfunctional and crisis-stricken economy.

The currency controls, which require businesses and individuals to buy dollars via the state, are frequently identified as one of the main drivers of the crisis that includes hyperinflation and product shortages.

Economists noted that the central bank remains in charge of determining the exchange rate. Before Saturday’s measure, the government had only sold greenbacks through the central bank although many transactions routinely took place on the black market.

“The exchange controls are being maintained, though they are a bit more flexible,” said economist Asdrubal Oliveros of local consultancy Econanalitica, responding to social media commentary suggesting that the controls had been lifted.

Legislator and economist Jose Guerra said the measure was the furthest the government has gone in easing the controls, but that it would depend entirely on how it was implemented.

President Nicolas Maduro during five years in office has repeatedly promised to create marketbased systems to improve access to hard currency. Each attempt has fallen apart because the systems were unable to provide steady access to dollars.

The government currently sells dollars for around 62 bolivars, while the black market rate is Nicolas Maduro

around 90.

That disparity has in the past made foreign exchange systems unworkable because it creates incentives to buy dollars at the preferential rate and quickly resell them at a profit on the black market, meaning the preferential dollars quickly dry up.