Venezuelan Exchange Houses Only Serve to Benefit Government Cronies
After the opening of exchange houses in Venezuela, along the Colombian border, questions arise as to who will really be benefiting, as few Venezuelans will be able to change their bolivars for Colombian pesos or dollars.
In addition, the installation of such exchange houses was done with the supposed intention of reducing black market currency exchanges, and “finishing with the black dollar”; but how can this be juxtaposed with the reality that they will have completely the opposite effect, as the Venezuelan exchange houses will only feed the parallel market for foreign exchange.
Nicolás Maduro’s regime announced that he hopes to open at least 20 exchange houses, but if not all Venezuelans can access dollars or Colombian pesos, who will be the true beneficiaries?
One would have to ask how the foreign exchange offices are going to acquire the hard currency in order to be able to change money? The only entity that has this ability is the state, which officially handles the entry and exit of dollars in the South American country.
But the government has also announced a series of new requirements and bureaucratic procedures which will further complicate the process of utilizing the exchange houses for foreign citizens.
The steps and requirements include: presenting an original and a copy of identification, Tax Information Record (RIF), a receipt of a public service (where the person resides), and the individual’s last income statement. In addition, you must be registered in Italcambio, choose the branch for your appointment, and wait for your appointment electronically.
However, the few Venezuelans who manage to navigate these bureaucratic procedures will have the opportunity to greatly multiply their money.
Venezuelan economist William Ruiz explained to PanAm Post what the “exchange centrifuge” is.
With bolivars a Venezuelan buys foreign exchange at a cheap or subsidized exchange rate (facilitated by the government), then later sells that same currency in the black market or parallel market at a much higher cost, turning a lucrative profit in the process. The process is constantly repeated.
But only a few will be able to access foreign currency at these exchange rates; the supply is restricted and the government has emphasized that there are not enough dollars due to falling oil prices.
The exchange houses can only sell USD $200 in cash and USD $300 per wire transfer during the course of the month.
Ruiz states that it is difficult to maintain the operation of the exchange houses because the rate set by Italcambio of 4 pesos per bolívar is exceedingly unrealistic. Such a fantastical rate would obligate the government to spend its international reserves, which would only result in more inflation.
With respect to its international reserves, the government would have to take their dollars and change them for Colombian pesos in order to be able to sell them to Venezuelans. This would require them to print greater quantities of bank notes, which at the unfavorable exchange rates of today, would be prohibitively costly.
“This is not something that a middle-income citizen can have access to, only those plugged in (who have commercial relations with the regime) or those who participate in the exchange centrifuge will be the beneficiaries,” notes Ruiz.
But Runrun.es also explains how the same exchange houses in the hands of the state can earn millions of dollars.
Italcambio exchanges at the rate of 734.25 bolivares per dollar, well above the two official government exchange rates. The company also earns 56 bolivars for every dollar it obtains at the DICOM (official) rate. Given the estimated 317 million Colombian pesos that the exchange houses received in Táchira and Zulia on Tuesday the 17th, Italcambio had, in only its first day, earned USD $8,968.41.
Italcambio will have the possibility of doing the same thing that Venezuelans do in the “exchange centrifuge,” whereby they will convert the dollars they earn to bolivars on the black market, and thus have the capacity to earn 33 million bolivars on just their first day of operation.