Berliner Boersenzeitung - Closing the 'escape valve': Venezuela pursues de-dollarization

EUR -
AED 4.02547
AFN 78.958383
ALL 99.102869
AMD 431.181955
ANG 1.961978
AOA 1003.890567
ARS 1184.765046
AUD 1.813586
AWG 1.97271
AZN 1.867466
BAM 1.955265
BBD 2.22659
BDT 133.983319
BGN 1.957778
BHD 0.412787
BIF 3277.602688
BMD 1.09595
BND 1.474296
BOB 7.619914
BRL 6.405394
BSD 1.102698
BTN 94.079244
BWP 15.358795
BYN 3.608812
BYR 21480.619234
BZD 2.215094
CAD 1.559263
CDF 3148.664634
CHF 0.944431
CLF 0.02729
CLP 1047.223301
CNY 7.980215
CNH 7.994999
COP 4582.945323
CRC 557.847278
CUC 1.09595
CUP 29.042674
CVE 110.234821
CZK 25.256829
DJF 196.376238
DKK 7.461451
DOP 69.640934
DZD 146.03502
EGP 55.406831
ERN 16.439249
ETB 145.347308
FJD 2.537019
FKP 0.847795
GBP 0.850992
GEL 3.01429
GGP 0.847795
GHS 16.970527
GIP 0.847795
GMD 78.997119
GNF 9480.074229
GTQ 8.45127
GYD 228.536272
HKD 8.520633
HNL 28.038338
HRK 7.531044
HTG 143.530764
HUF 404.54591
IDR 18346.949665
ILS 4.100568
IMP 0.847795
INR 93.650132
IQD 1430.891791
IRR 46360.405806
ISK 144.204462
JEP 0.847795
JMD 172.42419
JOD 0.777072
JPY 161.061946
KES 141.527433
KGS 95.002298
KHR 4365.330633
KMF 489.529208
KPW 986.361205
KRW 1599.015607
KWD 0.337157
KYD 0.910826
KZT 556.162432
LAK 23685.841231
LBP 98372.711411
LKR 324.07413
LRD 218.985421
LSL 20.902803
LTL 3.236056
LVL 0.66293
LYD 5.289988
MAD 10.429326
MDL 19.551233
MGA 5069.578931
MKD 61.05679
MMK 2300.919896
MNT 3846.361639
MOP 8.775473
MRU 43.593447
MUR 49.000806
MVR 16.923331
MWK 1897.317993
MXN 22.386696
MYR 4.861215
MZN 70.003894
NAD 20.902803
NGN 1681.066767
NIO 40.290501
NOK 11.790932
NPR 149.910449
NZD 1.95777
OMR 0.421946
PAB 1.09595
PEN 4.037053
PGK 4.46999
PHP 62.764717
PKR 306.904853
PLN 4.245513
PYG 8757.469729
QAR 3.989667
RON 4.952931
RSD 116.586887
RUB 93.840941
RWF 1555.449869
SAR 4.110221
SBD 9.312612
SCR 15.97682
SDG 658.021292
SEK 10.947921
SGD 1.470849
SHP 0.861245
SLE 24.933268
SLL 22981.523891
SOS 624.324825
SRD 40.248477
STD 22683.951476
SVC 9.589967
SYP 14249.994157
SZL 20.902803
THB 37.792726
TJS 11.899889
TMT 3.833642
TND 3.357047
TOP 2.638671
TRY 41.641737
TTD 7.422798
TWD 36.332658
TZS 2923.758392
UAH 45.158896
UGX 4009.400205
USD 1.09595
UYU 46.167964
UZS 14171.813622
VES 77.086835
VND 28252.54745
VUV 134.896075
WST 3.078778
XAF 652.705611
XAG 0.037037
XAU 0.000361
XCD 2.966325
XDR 0.817067
XOF 652.705611
XPF 119.331742
YER 269.409315
ZAR 20.929909
ZMK 9864.868719
ZMW 30.636217
ZWL 352.89544
  • RIO

    -3.7600

    54.67

    -6.88%

  • RBGPF

    69.0200

    69.02

    +100%

  • SCS

    -0.0600

    10.68

    -0.56%

  • CMSC

    0.0300

    22.29

    +0.13%

  • BCC

    0.8100

    95.44

    +0.85%

  • GSK

    -2.4800

    36.53

    -6.79%

  • BTI

    -2.0600

    39.86

    -5.17%

  • NGG

    -3.4600

    65.93

    -5.25%

  • RELX

    -3.2800

    48.16

    -6.81%

  • AZN

    -5.4600

    68.46

    -7.98%

  • CMSD

    0.1600

    22.83

    +0.7%

  • JRI

    -0.8600

    11.96

    -7.19%

  • BCE

    0.0500

    22.71

    +0.22%

  • VOD

    -0.8700

    8.5

    -10.24%

  • RYCEF

    -1.5500

    8.25

    -18.79%

  • BP

    -2.9600

    28.38

    -10.43%

Closing the 'escape valve': Venezuela pursues de-dollarization
Closing the 'escape valve': Venezuela pursues de-dollarization / Photo: Federico PARRA - AFP

Closing the 'escape valve': Venezuela pursues de-dollarization

Having opened its arms to the US dollar as an "escape valve" Venezuela is now trying to re-energize its own currency, which has been crippled by devaluation in recent years.

Text size:

The aim is to incorporate $3 billion circulating on the streets of the South American country into its financial system, but experts warn it is a risky gamble.

Distrust in the bolivar due to severe devaluations, demonetization and four years of hyperinflation persists, despite a slow down in price rises and economic recovery following seven years of recession in which GDP fell by 80 percent.

The dollarization, described by President Nicolas Maduro as an "escape valve", alongside an easing of price controls brought an end to the scarcity of bare essentials and the interminable queues for what little was available, such as a bag of rice.

"It's a risky bet with bad timing because the recovery is very weak and the economy is still suffering from chronic inflation. Not hyperinflation but still chronic inflation," Asdrubal Oliveros, director of consultancy Ecoanalitica, told AFP.

"(Inflation is) very high for you ... (to be able) to re-establish confidence in the currency from one day to the next."

The latest move, applied at the end of March, was to impose a tax ranging from three to 20 percent on transactions using foreign currencies.

The government hopes to encourage use of the bolivar, which was also boosted by a massive injection of foreign currency into the market to stabilize the exchange rate.

The official exchange rate has only fallen from 4.18 bolivars to the dollar in October to 4.43, a depreciation of 6.7 percent, compared 76 percent last year and more than 95 percent in each of the three previous years.

Inflation ended 2021 at 686 percent, according to the Central Bank -- the highest in the world but an enormous improvement on the preceding three years: 130,000 percent in 2018, 9,500 percent in 2019 and just under 3,000 percent in 2020.

- 'Different dynamic' -

The government has recorded some successes in its policy to boost use of the bolivar.

The Superintendency of Banks said that since the imposition of the new foreign currency tax, online bolivar payments were up 21 percent and debit card payments increased 22 percent.

"We're entering a different dynamic," Henkel Garcia, director at consultants Econometrica, told AFP.

"Venezuela is currently a demonetized country. They are trying to remonetize it and to do so with bolivars .... Having your own currency gives you a scope to maneuver."

Outlawed for 15 years by state currency controls, the dollar became a refuge for Venezuelans during the economic crisis in 2019.

The dollar started being widely used when frequent nationwide power cuts made card payments and bank transfers impossible, as the bolivar's depreciation left the local currency in scarce supply.

Now, Ecoanalitica says almost 45 percent of urban commerce is done in dollars and 8.5 percent in Colombian pesos, a popular currency in border areas.

In 2021, foreign currencies made up 70 percent of the market.

"Four in every five (dollars) are outside the banks, the people have them in their hands, in businesses, in their homes. We're talking about around $3 billion in circulation," said Oliveros.

If that money was put into banks it could boost depressed credit.

There are risks, however, not least the possibility of "slowing the advance of economic activity" given that dollarization gave "certainty" to the private sector, said Oliveros.

- 'Tax? Bye-bye' -

"They charged me the three percent in two places. I paid in dollars and they charged me the taxes in bolivars," said Maria Isabel Marcano, 48, after a shopping run.

Although the tax was implemented a little over a month ago, many Caracas businesses are still not applying it to foreign currency transactions, insisting they are still updating their systems. As an incentive, the government has offered loans to buy tax machines.

Not everyone is convinced, however.

"There are people who come and say to you: are you going to charge me the tax? If you charge me, bye-bye," said one merchant.

But others, like the popular Arturo's chain of fried chicken restaurants, say the new system is up and running.

The company has around 70 restaurants in the country, and says it only had to suspend trading for a few hours at the end of March.

"Now, everything is working normally," Laura Decena, the company's marketing director, told AFP.

(K.Lüdke--BBZ)