Capital Flight To South Florida
Luxury sedans and SUVs jam the parking lot at the Regions Bank branch in Weston, Fla., near Fort Lauderdale. Inside, dozens of people pack the lobby for a reception to honor the town's Venezuelan residents--a community so large that Weston has been nicknamed Westonzuela. Venezuelan entrepreneurs munch on arepas and empanadas prepared by a local Venezuelan caterer. Even the mayor has shown up to raise a glass.
South Florida is a prime destination as Venezuelans rush to move their money out of the reach of Hugo Chávez. Capital flight from Caracas is nothing new: Venezuelans have been channeling funds north for decades as they have hedged their bets against economic instability. Nearly every real estate agent has an anecdote about a Venezuelan whipping out a fancy pen to write a check for a condo facing Biscayne Bay. But the pace of the outflow is picking up. As many as 100,000 Venezuelans now live in South Florida, and their numbers are rising.
And there's a new sense of desperation. With their economy growing in the double digits, Venezuelans are less worried about their savings being eroded. Instead, they fear Chávez could confiscate their bank accounts and businesses. "Previous capital-flight dollars were driven by poor economics rather than a controversial leader," says Ken Thomas, a Miami banking consultant who calls the money flowing from Caracas "CD dollars," meaning "Chávez-driven." Venezuelan economist Emilio Medina-Smith, who studies capital flight, estimates that roughly $1 billion has left the country monthly for the past three years, a big increase from Chávez's first years in power. And bankers in Miami say the latest wave of Venezuelan capital flight reminds them of Fidel Castro's rise in Cuba.
But getting capital out of Venezuela is complicated and expensive. Chávez imposed strict controls in 2003 that limit dollar purchases and require government approval for them. What's more, many Venezuelans don't want the government to know how much money they have. That's why they turn to the black market to trade bolivars for dollars, even though the rate is nearly double the official level. Then they either travel abroad or make arrangements with relatives or friends that have access to a foreign bank account. "People will pay a premium to take their money out through the black market because they don't want any official record," says Clemente L. Vazquez-Bello, a Miami lawyer specializing in anti-money-laundering compliance.
As Chávez keeps the pressure on, Venezuelans are constantly finding new ways to move their money. One legal method is to buy Venezuelan government bonds and swap them abroad through a broker for dollar-denominated bonds--even though the maneuver is pricey. Another strategy is to buy "gift certificates" from online outfits that will then wire the money to an offshore bank account.
By Ian Katz in Miami