Venezuela takes another step towards so-called “dollarization”.
After years of tight currency controls and sanctions against those who buy dollars on the black market, Nicolás Maduro announced that Venezuelan banks will be able to start receiving foreign currency deposits and facilitate their use for payment for goods and services. .
“Savings and checking accounts in foreign currency are allowed,” Maduro said on state broadcaster Telesur on January 1. According to the Reuters news agency, some banks have already started issuing debit cards to their customers who have foreign currency accounts.
It is estimated that more than 55% of transactions in the country are already carried out in dollars, a trend which is developing and which has been tolerated by the authorities. From now on, predictably, it will be accentuated with the authorization of the banks.
Venezuela suffers from hyperinflation and the constant loss of value of the bolívar, the national currency. This has worsened the effects of the economic crisis on the population, who increasingly seek the dollar and other currencies as an alternative.
What is the new system?
“In reality, the government is simply recognizing a practice that already existed to give it a more stable legal framework,” Luis Vicente León, of the consultancy firm Datanálisis, told BBC News Mundo, the Spanish service of the BBC.
Faced with the increasing flow of dollar transactions, many companies have run into the problem of where to deposit value. Banks started offering deposit accounts last year, which they offered the option of keeping money in their vaults, but not working with.
For companies like Caracas’ supermarkets, which earn huge sums of money every day, this was a partial solution to keeping their profits safe.
And Venezuelan banks were able to create mechanisms that bypassed legal restrictions and allowed those dollars to be used as collateral in transactions.
What’s new is that now businesses and individuals will be able to start using those dollars to purchase goods and services through popular electronic payment methods, such as debit cards.
Henkel García, a specialist at Econometrics, explains: “In fact, what is behind it is a foreign exchange transaction. The bank updates the dollars in your account with the user and gives the merchant the equivalent in bolivars. according to the exchange rate.. day “
According to Luís Vicente León, “this system will facilitate transactions, because it will facilitate payments”.
In fact, paying for anything is often a complicated task in the country. Bolivarian banknotes have been missing for years, and power and communication failures often render electronic payment terminals unusable.
Although there are more and more dollars, there are almost no small notes in this currency, which often makes it difficult to pay the exact amount with them.
Does the change solve the problems?
“By facilitating transactions, the government seeks to reactivate the economy,” says Henkel García.
León underlines another key point: “As many operations will now become formal, the government will increase its tax collection.”
“The government had no choice, because by forcing people to use the bolivar, the only thing that caused it was a growing black market for dollars,” adds León.
Allowing banks to operate with dollars and other currencies is another step in the line of openness that the Venezuelan government appears to be following in recent months, deviating somewhat from its statist policies and restrictions on private activity. .
Maduro recently promoted the so-called “anti-blocking law”, with which he intends to attract international investors to stimulate an economy that has lost more than half of its value since taking office. The country has suffered international economic blockages since 2014.
At the end of January, Jorge Rodríguez, considered one of Chavismo’s most influential leaders, met with the leaders of Fedecámaras, the country’s largest business organization, with which the government traditionally had conflicted relations.
León says that “the economy is opening up, not because the government has changed its philosophy, but because it has lost the capacity to control”.
“Before, he had all the dollars that came into the country and had the resources to compete with the private sector. But the American sanctions left the state without access to currency and without being able to operate in the international market. So now the private sector is the only thing left to guarantee the country’s supply. “
Analysts point out that with the new system, the government seeks to reduce barriers to the flow of money, but the barriers will continue to be numerous.
Common things in other countries, like transferring dollars from one bank to another, will always be impossible.
“This would require the participation of a central bank as guarantor of this system and the Central Bank of Venezuela is prevented from playing this role by international sanctions,” said Henkel García.
And the Venezuelan Superintendency of Banking Sector Institutions (Sudeban) has determined that banks are prohibited from granting foreign currency loans and noted that entities need prior authorization for their operations, which appears to limit the scope of Maduro’s advertisements.
In any case, experts warn, those who will not benefit from the potential advantages of the new system will be the many Venezuelans who only have income in Bolivars, the majority and disadvantaged sector of the population.
Change of tone in government
The government of Nicolás Maduro for years banned the use of the dollar, which it saw as a “criminal” currency used by the American “empire” in its “economic war” against Venezuela.
But Maduro now refers to it as a “safety valve” for the economy.
The end of the foreign exchange controls in force in the country for years made the exchange rate of the parallel market very similar to that of the official market.
Yet Henkel García believes those with access to dollars “have little incentive to deposit their savings into a system controlled by a government that does not inspire confidence.”
“The dollars that go into the system will be the minimum necessary for transactions, but successful people will continue to save overseas or keep the money at home.”
The scarcity of safes in a state exhausted by years of ineffective US policies and sanctions makes people suspicious.
“It doesn’t seem likely at this point, but Latin American governments have always been tempted to use confiscation,” Garcia says.