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Venezuela’s authoritarian socialist government is cracking down on the use of black market dollars as it seeks to protect the embattled bolívar currency in the face of US sanctions and “secondary” tariffs.
The parallel exchange rate at which the bolívar is traded outside official channels climbed 25 per cent from about 80 bolívars to the dollar in late February to 104 on Wednesday this week after the US announced tightened sanctions on Caracas, before retreating back to 101.
That diverged sharply from the official rate, which crept from 63 bolívars to 70.59 against the greenback over the same period. The divergence has prompted Caracas to crack down on businesses trading at the parallel rate in a country where goods carry retail prices in dollars but customers pay in bolívars.
Retail and services businesses in the oil-rich South American country face audits, fines and even closures for selling at the parallel exchange rate. In the past two weeks businesses have reported much tougher enforcement of the existing rules.
Shopkeepers, hair salons and restaurants have been struggling to navigate the dual rates, risking heavy fines for selling at the parallel rate but suffering losses on sales if they do not.
“We risk fines which would meaning shutting down the business as they’re unaffordable,” said one Caracas shopkeeper, who asked to remain anonymous for fear of government reprisals.
If customers pay in bolívars, he sets an “intermediary” price between the two rates, he said, allowing him to escape steep losses while avoiding signs of having charged the banned parallel rate.
Some businesses reported using an app of unknown origin to calculate this third rate, which on Thursday hovered between 80 and 90 bolívars to the dollar.
Venezuela’s economy, heavily reliant on oil, is likely to suffer as US President Donald Trump’s administration ratchets up pressure on Nicolás Maduro, who was inaugurated for a third term in January following an election widely regarded as a sham.
In recent weeks the US has cancelled individual licences that allowed international companies including Chevron, Repsol and Eni to do business with Petróleos de Venezuela, the sanctioned state-owned oil major.
The companies have until May 27 to wind down operations, adding to pressure on an economy and currency already battered by sanctions.
Government finances were also threatened by Washington’s announcement on March 24 of “secondary tariffs” on countries buying Venezuelan crude. The country’s oil exports fell 11.5 per cent month-on-month in March, according to a Reuters analysis of shipping data, although vice-president Delcy Rodríguez denied that report, claiming that oil exports rose 8.7 per cent.
The measures threaten Venezuela’s tentative recovery from a collapse in which GDP contracted by three quarters in the eight years to 2021.
That turmoil and deepening repression led 7.8mn Venezuelans to flee. To tame hyperinflation, the government adopted orthodox economic reforms in 2022, including a relaxation of price controls and reduced public spending. A tacit dollarisation took place.
Those gains are now under heavy strain, with inflation threatening to reach 189 per cent this year, according to Caracas-based consultancy Ecoanalítica, in part because of Trump’s hawkish Venezuela policy.
Analysts estimate the exemption licences were worth about $4.5bn to Maduro’s government last year, while Chevron alone put about $200mn a month into the exchange market.
“What the government should do is try to take advantage of the informal dollarisation that exists in Venezuela,” said Asdrúbal Oliveros, director of Ecoanalítica.
“Repealing a tax on dollar transactions and allowing dollar transfers to banks again would allow people to use their dollars more freely and help ease the pressure on the exchange rate.”
During his first term, Trump in 2019 sought Maduro’s ousting by recognising then-opposition leader Juan Guaidó as Venezuela’s president and levying “maximum pressure” sanctions on the oil industry, to little effect.
Luis Vicente León, who runs Venezuelan consultancy Datanálisis, said the current sanctions could lead to GDP shrinking 3 per cent this year.
“As always with sanctions, the government will begin to adjust to them,” León said, adding that the government could take over oilfields. “They know how to sell oil on the black market, and more importantly, how to get paid.”
At the market in central Caracas, stalls display signs showing the official dollar rate — a government requirement — but transactions are made verbally at the parallel rate, without bookkeeping.
Vendors such as egg handler Viviano González are struggling with volatile prices. He said the price he paid for 30 dozen eggs rose from $61 to $73 within 24 hours, although in bolívars the price by the end of that time equated to $80.
“It’s getting worse every day,” González said. “I have to set the price at a point where I don’t lose so much, at an average exchange rate, because if I raise prices people rightly get upset.”