Venezuela devalued its currency for foreign tourists by 44 percent today after the bolivar slumped to a record low on the black market.
People visiting the South American country can buy bolivars at 11.3 to the U.S. dollar compared with the 6.3 official rate for most other transactions, the central bank said in a statement posted on its website. Oil investments will also use the new exchange rate that is set at weekly currency auctions that resumed in October, Economy Vice President Rafael Ramirez said Dec. 16. The auction rate hadn’t been disclosed until today.
“This is the first step toward an officially weaker exchange rate across the board,” Daniel Snowden, emerging markets economist at Informa Global Markets in London, said by telephone today. “We are looking at a significant devaluation early next year.”
Venezuela, which already devalued the bolivar 32 percent in February to 6.3, has been unable to arrest the decline of its currency on the black market, where companies and individuals pay as much as 64 bolivars per dollar. President Nicolas Maduro re-started the parallel foreign currency auctions, known as Sicad, two months ago to reduce product shortages of imported goods before Christmas.
The yield on the Venezuelan government’s benchmark dollar bonds due in 2027 was largely unchanged at 12.61 percent at 11:03 a.m. in New York today, according to data compiled by Bloomberg.
Tourists will be able to sell as much as $10,000 a year at the weaker exchange rate, according to an Oct. 31 decree.
The bolivar has lost 73 percent of its value on the black market this year, according to rate-tracking website dolartoday.com.
A decade of currency controls has made dollars increasingly scarce, with foreign reserves falling to a nine-year low this month. The restricted supply of dollars to companies has led to shortages of imports ranging from tires to beef.
Falling imports push up the price of those goods available locally, causing annual inflation to rise to 54 percent in October, the highest rate among the 103 economies tracked by Bloomberg.
Maduro has blamed inflation, product shortages and the rising black market rate on “economic sabotage” by political opponents.
The Sicad auctions “will evolve into a definitive mechanism for the control and management of our foreign currency,” Ramirez said Dec. 16. The main currency system known as Cadivi, which distributes 95 percent of the country’s dollar supply at the 6.3 rate, will be replaced, he said, adding that Venezuela has no plans to end currency controls.
Non-residents who buy bolivars in airports and ports can sell as much as 25 percent of them back to central bank upon departure. Foreign credit cards swiped in the country will use the tourist rate.
“No tourist who is moderately informed is going to exchange at an official rate below the black market rate,” Asdrubal Oliveros, director of Caracas-based consulting firm Ecoanalitica, said Dec. 20.