Santa Elena de Uairen, April 14th, 2015. (venezuelanalysis.com)- Venezuelan government officials have announced new measures to reduce commonly practiced forex scams which have long dogged the country’s economy.
On Friday, the National Bureau for Exterior Commerce (Cencoex) scaled down the amount of hard currency available to Venezuelans for foreign travel through government subsidy. The reductions were tailored to regions most frequented by forex fraudsters, such as Miami and Panama.
Venezuelans could previously get US$2,500 for travel to the United States, but they are now only permitted to buy US$700 at the preferential rate of 6.3 bolivars to the dollar. If needed, the traveler may purchase more dollars at private exchange houses at official free-floating rate of 195 bolivars to the dollar, which is a more accurate representation of the dollar’s street value.
The new restriction was met with fury by Venezuela’s upper-middle class, who are easily the most effected by the law.
While many Venezuelans took advantage of the 6.3 rate to travel and study abroad, the unique subsidy known as Cadivi has long been the axle of a black-market business that has caused inflation and currency devaluation internally.
In the days following the 8th Summit of the Americas in Panama, a suspected attendee filmed a Panamanian taxi driver talking about Venezuelan “raspacupos” or card-swipers, who for years have been notorious among Panama City cabbies.
In the video aired this morning on state television, the unnamed driver explained how starting in 2006, Venezuelans would touch down in the capital with “about 1000 credit cards” each, and hire taxis to take them to ATMs all around the city.
“I had to tell ‘em,” the driver told the passenger filming, “How are you going to withdraw $60,000 and get into my taxi?”
Before long, he said, taxi drivers learned to charge special fares to Venezuelan visitors.
Meanwhile, Venezuelan residents were making money by selling their quota of preferential dollars to the raspacupos, who would make all the necessary arrangements so that in the end, only one person would travel with many people’s cards. Upon returning home, the foreign currency would be sold on the black market for a windfall profit.
The injecting of dollars into the black market trade skewed the currency’s value, making the business itself ever more lucrative as the bolivar devalued.
The government has made similar restrictions in the past, but has shown reluctance at coming down to hard on the only program by which normal Venezuelans may have access to affordable foreign travel.
The latest cut alone is estimated to save the country USD2.8 billion in 2015, according to a Barclays analyst.
In response to the measure, Venezuelan global bonds jumped on Monday morning as Wall Street calculated a decrease in the country’s risk of default.
In a speech made yesterday evening, President Nicolas Maduro threatened to come down hard on the website dolartoday.com, which has facilitated black market dealings by running a speculative “street rate” for the dollar, currently 276, which has become the benchmark for fraudsters’ profits.
Calling upon Public Prosecutor Luisa Ortega Diaz to help, Maduro said, “Sooner or later we’ll have the people of DolarToday behind bars.”
“What do you want me to do,” he continued. “Keep giving dollars away to parasites? The game is up, bourgeoisie!”
7000 Companies to be Audited
Additionally, the head of Venezuela’s National Assembly declared yesterday that around 7,000 companies will be investigated for alleged abuse of Cadivi quotas.
During a televised interview, Diosdado Cabello explained that a special investigation has been launched by the assembly to weed out those companies who sell the dollars allotted to them, rather than use the subsidy to import necessary items.
The commercial abuse of Cadivi is a primary contributing factor to scarcity of basic items in the country.
Companies that fail to provide evidence face either blacklisting from the official exchange system, or criminal charges. In Venezuela, the fraudulent use of foreign currency can carry a prison sentence of up to seven years.