US-sanctioned Venezuela doubles euro supplies to banks
NEW YORK : Venezuela's central bank has doubled the amount of euros in cash it provides local banks as hyperinflation and US sanctions prompt a surge in use of the European currency, four sources familiar with central bank activities said. Payment in euros has become more common round Venezuela since the bank started distributing them to financial institutions in February, shortly after Washington intensified sanctions intended to force out leftist President Nicolas Maduro. The banks distribute the cash to local companies to pay for imports or employee bonuses, easing pressure on the depreciated and cash-scarce local bolivar currency.
In mid-October, the monetary authority began giving around 1 million euros ($1.10 million) each week to the country's main private banks and around 500,000 euros to smaller banks, double the previous amounts, the sources said.
At that rate, the euros could surpass within months the value of bolivars in circulation, which authorities put at the equivalent of $59 million.
Though it was illegal to use foreign currency until mid2018, those Venezuelans who can often keep euros or dollars to protect against constantly rising bolivar prices, using them for daily transactions from food to car parts and even church collections. The increased distribution of euros comes because the OPEC nation is receiving them for more of its crude and gold exports in the wake of sanctions, rather than dollars, according to three of the sources, one close to Maduro. "Now, more euros come from oil than from gold," said the source linked to the ruling party, who spoke on condition of anonymity. Reuters was unable to independently confirm that. Some foreign institutions have been reluctant to deal with Venezuela's financial system after Washington on March 22 sanctioned Venezuelan state banks including the central bank and state development bank, Bandes.
In August, the US Treasury said it could sanction any entity it determines to be providing material assistance to Maduro's government. The use of euros in Venezuela boomed this year after state oil company PDVSA began receiving the bills in payment for crude shipments, a strategy to avoid the US financial system amid sanctions.