Venezuela currency weakens 10 percent in three days on black market

CARACAS (Reuters) - Venezuela’s bolivar currency tumbled past the psychological barrier of 4,000 per dollar on the black market on Wednesday, racking up a 10 percent depreciation since Monday and fueling concerns about the crisis-stricken OPEC nation’s economy.

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The black market rate has weakened 62 percent this month amid Soviet-style product shortages and a crippling recession that have become the norm in Venezuela’s steadily unraveling socialist economy.

The rate reached 4,121 according to website DolarToday, which is a primary reference for the black market rate even though President Nicolas Maduro as well as many of his critics complain the rate lacks transparency and is subject to manipulation.

The black market had remained steady at around 1,200 bolivars for several months, but was boosted by the payment of legally mandated Christmas bonuses as well as an 11 percent increase in money supply in November.

Basic purchases such as a few days worth of groceries often require stacks of 100-bolivar notes, the largest denomination.

A brick-sized package of 1,000 of the smallest bill, a two-bolivar note, buys a loaf of sandwich bread. Fifteen years ago, one individual note of equivalent value would have bought a modest lunch.

Maduro says his government is the victim of an “economic war” led by business with the backing of Washington. Opposition leaders say the situation is largely the result of dysfunctional state controls that cripple the economy.

Venezuela’s central bank is preparing to launch a 500-bolivar note, Socialist Party legislator Ricardo Sanguino said on Tuesday. Bankers and economists say the government should issue bills of much larger denominated because 500 bolivars only buys two packages of chewing gum, two packs of soda crackers, or five loose cigarettes.

The country maintains an exchange control system that sells dollars at a rate of 10 bolivars for food and medicine and 661 bolivars for less important items. But businesses and individuals say they rarely get access to those rates and thus end up using the much less favorable black market.

Venezuelans complain of long lines at banks and withdrawal limits that turn even basic purchases into a headache.

“The bank teller told me that they’re only allow withdrawals of 10,000 bolivars, but that isn’t even enough to buy two bags of laundry detergent,” said Luis Cote, 38, a teacher, as he was leaving a bank in the city of San Cristobal near the border with neighboring Colombia.

Reporting by Brian Ellsworth, additional reporting by Anggy Polanco in San Cristobal; Editing by Alexandra Ulmer and Jonathan Oatis