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

EUR -
AED 3.996561
AFN 72.901733
ALL 98.526046
AMD 421.272213
ANG 1.961331
AOA 991.788876
ARS 1072.871472
AUD 1.659164
AWG 1.961263
AZN 1.854055
BAM 1.9584
BBD 2.197388
BDT 130.04684
BGN 1.962524
BHD 0.410115
BIF 3152.166566
BMD 1.08808
BND 1.440793
BOB 7.547263
BRL 6.386923
BSD 1.08828
BTN 91.529622
BWP 14.548784
BYN 3.561379
BYR 21326.35992
BZD 2.193663
CAD 1.520646
CDF 3141.834075
CHF 0.939938
CLF 0.0379
CLP 1045.775484
CNY 7.750069
CNH 7.74636
COP 4816.362534
CRC 558.058857
CUC 1.08808
CUP 28.834109
CVE 110.930143
CZK 25.448554
DJF 193.373932
DKK 7.490671
DOP 65.731315
DZD 144.348659
EGP 53.012569
ERN 16.321194
ETB 131.71246
FJD 2.475425
FKP 0.832565
GBP 0.841711
GEL 2.975941
GGP 0.832565
GHS 17.790526
GIP 0.832565
GMD 77.801881
GNF 9391.215308
GTQ 8.408279
GYD 227.579466
HKD 8.463682
HNL 27.256816
HRK 7.495813
HTG 143.213428
HUF 410.101365
IDR 17244.973386
ILS 4.083046
IMP 0.832565
INR 91.544325
IQD 1425.38426
IRR 45799.994199
ISK 149.556959
JEP 0.832565
JMD 172.499018
JOD 0.771562
JPY 166.503422
KES 140.362649
KGS 93.361362
KHR 4439.365099
KMF 493.825338
KPW 979.271384
KRW 1501.920195
KWD 0.333617
KYD 0.9069
KZT 532.218828
LAK 23856.145341
LBP 97508.952264
LKR 318.798858
LRD 208.857292
LSL 19.172377
LTL 3.212817
LVL 0.658169
LYD 5.244958
MAD 10.500382
MDL 19.479773
MGA 5021.487675
MKD 61.511523
MMK 3534.040058
MNT 3697.294469
MOP 8.717755
MRU 43.539547
MUR 49.899742
MVR 16.767718
MWK 1887.81846
MXN 22.069196
MYR 4.764161
MZN 69.539577
NAD 19.172373
NGN 1792.615173
NIO 39.987335
NOK 11.960672
NPR 146.442405
NZD 1.824413
OMR 0.417113
PAB 1.08837
PEN 4.106961
PGK 4.251943
PHP 63.505807
PKR 301.946113
PLN 4.381416
PYG 8597.414348
QAR 3.961158
RON 4.994725
RSD 117.546368
RUB 106.177129
RWF 1483.052478
SAR 4.087193
SBD 9.05275
SCR 15.364089
SDG 654.483872
SEK 11.534345
SGD 1.442907
SHP 0.832565
SLE 24.754214
SLL 22816.481435
SOS 621.293812
SRD 37.663916
STD 22521.050642
SVC 9.521641
SYP 2733.832898
SZL 19.172364
THB 36.889868
TJS 11.568324
TMT 3.808279
TND 3.366559
TOP 2.548395
TRY 37.349859
TTD 7.377031
TWD 34.750872
TZS 2932.374854
UAH 44.977514
UGX 3984.289738
USD 1.08808
UYU 45.069837
UZS 13954.621076
VEF 3941625.468227
VES 46.573289
VND 27528.41357
VUV 129.179027
WST 3.047911
XAF 656.826016
XAG 0.032257
XAU 0.0004
XCD 2.94059
XDR 0.817975
XOF 655.571864
XPF 119.331742
YER 272.40112
ZAR 19.204871
ZMK 9794.025888
ZMW 29.192697
ZWL 350.361183
  • NGG

    0.6700

    64.26

    +1.04%

  • RELX

    0.8600

    47.08

    +1.83%

  • SCS

    0.1100

    12.14

    +0.91%

  • CMSC

    -0.0200

    24.53

    -0.08%

  • RBGPF

    66.4100

    66.41

    +100%

  • BTI

    0.0900

    35.07

    +0.26%

  • GSK

    0.1200

    36.88

    +0.33%

  • BCC

    1.1800

    134.21

    +0.88%

  • RIO

    0.4400

    65.33

    +0.67%

  • AZN

    0.2700

    71.42

    +0.38%

  • RYCEF

    0.0500

    7.13

    +0.7%

  • BCE

    -0.1600

    32.1

    -0.5%

  • JRI

    -0.0300

    13.05

    -0.23%

  • VOD

    0.0800

    9.35

    +0.86%

  • BP

    -0.1300

    29.23

    -0.44%

  • CMSD

    0.1500

    24.81

    +0.6%

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)