Venezuelans rush to benefit from rare reverse in currency rate trend

CARACAS (Reuters) - It is an unusual sight for Caracas: lines are forming outside currency exchange houses that had been largely deserted since the Venezuelan government introduced controls 16 years ago.

People wait in line outside of a currency exchange house in Caracas, Venezuela, February 5, 2019. REUTERS/Andres Martinez Casares

That is because the official exchange rate for remittances from the growing diaspora abroad is now more attractive than the black market rate, a reversal of a long-standing dynamic.

The government is loosening controls in a bid to capture more dollars at a time when its hard currency income is under pressure from U.S. sanctions imposed to help the Venezuelan opposition oust President Nicolas Maduro, industry sources say.

The administration of U.S. President Donald Trump last week imposed sweeping sanctions on Venezuelan state-owned oil firm PDVSA, a key source of the OPEC nation’s revenue.

“For the time being at least, it’s worth coming here,” said Laura Espana, upon leaving a branch of Italcambio, one of the currency exchange houses authorized to operate by the government of Maduro.

Italcambio did not immediately reply to a request for comment.

Espana said she had gone to the exchange house twice over the past week to receive bolivars for hard currency sent by her daughter who lives abroad.

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On Tuesday, the official rate was 3,297 bolivars per dollar, well above the black market rate that was around 2,486 bolivars, according to the website DolarToday.

An ever growing number of Venezuelans receive remittances, given around one tenth of the population of 30 million has emigrated in recent years due to an economic collapse.

Consultancy firms estimate those remittances amount to around $1 billion per year.

“I’m receiving help from someone abroad to be able to buy some medicine,” said student Anggy Ochoa outside one exchange house.

Maduro’s government has sought to oblige Venezuelans to exchange their remittances at the official exchange rate, partly in order to tame inflation, the world’s highest.

Economists say the controls, first imposed by the government of Maduro’s predecessor Hugo Chavez, are themselves partially responsible for galloping prices and an economic crisis that has led to a political one.

Most European and Western Hemisphere nations have recognized opposition leader Juan Guaido as Venezuela’s legitimate leader and denounced Maduro as a dictator. Maduro, in turn, says he is victim of an “economic war” and a U.S-backed coup attempt.

Locals have long gotten around the controls by going through black market traders, agreeing transactions in person or via social media or texts.

But in January, the central bank for the first time hiked its own rate to parity with the parallel one. Since then, the black market rate has weakened.

“This is the first time I am selling dollars at a currency exchange house,” said Geovany Villarroel, a bank cashier, who just sold $35 for bolivars. “I used to do it by WhatsApp with a group of relatives to see who needed any.”

Reporting by Shay Valderrama and Jhonny Caravajal, additional reporting by Corina Pons, writing by Sarah Marsh, editing by Rosalba O’Brien