Authorities in Venezuela have captured 43 people accused of attempting to cheat the foreign currency control system to profit on the black market, an inevitable consequence of the government’s economic policies and currency controls.
The Commission for the Administration of Foreign Currency (Cadivi), the body which oversees the strict controls on the purchase and usage of dollars by Venezuelans, said the individuals had been caught “in fraganti” falsifying documents in order to access foreign currency, reported the Spanish news agency EFE. “Unscrupulous groups” had made huge profits, said Cadivi President Jose Khan.
Edmee Betancourt, until last week the president of Venezuela’s Central Bank, claimed in a recent interview that Cadivi had allowed swathes of fictitious businesses to access tens of thousands of dollars, said EFE.
InSight Crime Analysis
Criminal activities usually fill a need. In this case, the need is dollars for survival in a place where the local currency is completely out of whack with reality. The official rate of exchange is 6.5 bolivars per dollar; the black market rate is closer to 30 bolivars per dollar.
Not surprisingly, the illegal trade in dollars has surged. Criminal groups and individuals have found a whole host of ways to take advantage of this — generally in schemes that procure dollars by travelling abroad or through sham companies before selling them on the black market for a massive profit.
Hugo Chavez imposed strict controls in 2005, which limited the amount of foreign currency Venezuelans could use per year. According to the most recent quotas, Venezuelans traveling abroad are allowed access to $2,500 on a credit card per year and $500 in cash. Cadivi also allows citizens to spend $400 per year to buy things online in dollars. Importers, meanwhile, can buy dollar-denominated bonds from the government or buy goods in dollars in transactions through approved banks, all with cumbersome bureaucratic procedures attached.
SEE ALSO: Venezuela News and Profiles
The controls were imposed in an attempt to stop capital flight, by forcing investors to look for domestic opportunities as trading in dollars became difficult or impossible — and keep the price of the domestic currency stable. However, capital flight continued unabated, while a massive increase in oil revenue led the bolivar’s official value to swell, making exports uncompetitive (a classic example of “Dutch disease”), in turn leading the government to successively devalue the currency’s official rate.
As the bolivar has become less and less valuable, and the manufacturing industry has seriously declined (another symptom of Dutch disease), leading to a scarcity of basic products and the huge inflation of their prices, getting a hold of dollars has become more and more important to Venezuelans.