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A letter from Venezuela

Written by Searching Finance Team Wednesday, 16 February 2011 08:37
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The perils of entering a foreign economy in most countries go
unnoticed:the exchange rates, the amount siphoned off by your card
company and any local discrepancies can all be written off against the
fun you’re having and the short time of your stay.

Not in Hugo Chávez’s Venezuela.  The leftist state has two official
exchange rates.  In January 2010, the president announced that 1USD
would equal 2.6 BsF (Bolivars) at the first rate and 4.3 BsF at the
second.

The first would be for food, healthcare, public sector transactions,
remittances and so on—esential items.  The second rate is the
so-called oil dollar, set for industry, tobacco and so
on—non-essential items, according to Chávez.

"We want these measures to stimulate exports. We want Venezuela to
become a country that exports and stop being dependent exclusively on
oil," Chávez said.

This second rate was horrible for locals who saw the value of their
money halve to all intents and purposes.  This, coupled with the
limits put in place for Venezuelans to change money from the local
currency into US dollars has created a black market in dollars, as
business owners and rich folk attempt to stash their money in a
currency that does not fluctuate on the request of President Chávez.

One US dollar on this black market is currently worth 8.9 BsF.  That
is more than double the official rate for non-important items and
three times the rate for essential items!  Of course, the black market
rate is illegal and so cash machines and official transactions will go
by the much lower rate.  It is for that reason, that when travelling
to Venezuela you need to have a supply of physical cash in your
pockets as taking it out of a cash machine will be akin to burning
half of your money!

The way around it is to find someone in country who has a US bank
account and is willing to let you wire your money into it.  He or she
will then give you the money in local currency at hopefully the black
market rate.

This has huge benefits for foreigners when they have this (illegal but
certainly not frowned upon) scheme set up.  All prices of flights, for
example, when paid for in Bolivars are half the value they should be!
That means my flight to London which in the UK would cost £800 is now
only £400!

Last modified on Thursday, 24 February 2011 15:43

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