Don’t get caught out by currency restrictions
Dual currencies and black markets. Chris Wicks discusses how cash can get complicated in Venezuela.
On a recent visit to Venezuela to see an expat, I encountered the extraordinary dual currency system in force in that country. The official exchange rate is around 6 bolivars (B) per US dollar. But there exists a very active black market, which prices each US Dollar at around 28 bolivars. This leads to a number of interesting problems.
If you pay for goods and services in Venezuela using a UK or other foreign currency credit card, you will be charged at the official exchange rate. For example a night in a hotel costing say B2200 would end up costing you say US$366. But if you are able to come by currency on the black market, the same number of bolivars will cost you US$78. The unofficial rate is widely used and if you roll up in Venezuela with a wad of dollars, you will have no trouble finding people to swap them for you. Should people take advantage of the black market? That is another matter altogether. Jail time in Venezuela, although unlikely, is definitely not desirable! It is also worth mentioning that walking around Caracas bearing a large number of dollars, or bolivars for that matter, is likely to get you shot. It is a very dangerous place.
For expats who are paid in a local currency there are specific problems when it comes to extracting their funds due to restrictions on the amount that they are allowed to take out at a time. It is therefore important that they actively remove their funds during their stay rather than leave this until just before they leave.
Should people take advantage of the black market? That is another matter altogether. Jail time in Venezuela, although unlikely, is definitely not desirable!
A further issue to watch out for applies to people making long-term savings in a currency such as US dollars or sterling, especially where their employer contributes a fixed amount of bolivars each month. Given the widely fluctuating exchange rates that apply, the amount actually received by the insurer may be less than the contracted amount. This can lead to penalties if the shortfall is allowed to accumulate. It is therefore necessary to actively monitor the payments that have been received and ensure that shortfalls are made up in good time.
As with all expat financial planning the moral here is to plan what you are doing in good time and keep an eye on things as they can change very rapidly. This doesn’t just apply in Venezuela but in many countries around the world, especially those frequented by teachers in international schools.