Latin America
2:24 pm
Sun June 8, 2014

Hopping From Venezuela To Colombia To Evade Currency Controls

Originally published on Sun June 8, 2014 3:42 pm

Transcript

ARUN RATH, HOST:

From the studios of NPR West, in Culver City, California, it's ALL THINGS CONSIDERED. I'm Arun Rath. It's hard to find U.S. dollars in Venezuela, thanks to strict currency controls. That might not sound like a big deal, but it means huge headaches for Venezuelan businesses who need dollars to import goods. For some Venezuelans, the best option is to cross the border to the Colombian city of Cucuta, where greenbacks are plentiful. In fact, that city's money traders are so important, they help set black-market money exchange rates in Venezuela. Reporter, John Otis, has the story.

UNIDENTIFIED MAN: Spanish spoken.

JOHN OTIS, BYLINE: Here in Cucuta, located just across the Tachira River from Venezuela, you can't walk more than a few blocks without receiving offers from street corner moneychangers.

MAN: (Spanish spoken).

OTIS: They represent the informal market. The city is also home to 360 registered casos de Cambios, or currency exchanges. Many of these trading houses have goofy names, like this Mercurio, Pamba Express and El Calvo, which means bald guy, and is run by a bald guy.

MAN: (Spanish spoken).

OTIS: The money changers buy and sell Colombian pesos, Venezuelan bolivars and, increasingly, U.S. dollars. Many of their customers are Venezuelans, like Vladimir Valbuena.

VLADIMIR VALBUENA: Spanish spoken.

OTIS: Valbuena runs a crop-dusting business in the Venezuelan city of Merida. He needs dollars to import spare parts from the U.S. and Canada to keep his spray planes in the air.

VALBUENA: Spanish is spoken.

OTIS: But he says, buying dollars from the Venezuelan government, which is the only legal way to obtain them, takes months and that his requests are nearly always denied. Valbuena could change on the black market, but he sometimes needs $25,000 or more, sums that are not always available on the street on short notice. It's also risky. Changing on the black market carries a six-year jail sentence. So once a month, Valbuena makes the four-hour drive, from Merida to Cucuta, where he can legally purchase dollars.

VALBUENA: Spanish spoken.

OTIS: It's fast and easy, he says. People here are friendly, and you can get the dollars you need.

VALBUENA: Spanish spoken.

OTIS: But it's not just convenience that makes Cucuta important to Venezuelans. Cucuta's moneychangers help determine Venezuela's black market price for dollars. How do they do that? When Venezuelans change their bolivars for dollars on the streets, they often check websites, like Dollar Today, to find out the black market exchange rate. Dollar Today, in turn, comes up with its members by checking exchange rates in Cucuta. But how do Cucuta's traders get their numbers? To find out, I meet with Jose Maria Gonzalez, president of Cucuta's Money Changers Association. Warning, this involves a bit of math.

JOSE MARIA GONZALEZ: (Spanish spoken).

OTIS: Gonzalez says, money traders here set the exchange rate between Venezuelan bolivars and Colombian pesos based on daily supply and demand for the two currencies. To calculate how much a dollar is worth, they then divide that number into Columbia's official exchange rate between pesos and dollars.

GONZALEZ: (Spanish spoken).

OTIS: It may seem unfair that Colombians, waving thick wads of bills on the streets of Cucuta, can help sway dollar prices in Venezuela.

JOSE ROZO: (Spanish spoken).

OTIS: But Jose Rozo, who lives in the Venezuelan border town of San Antonio, calls this one of the many economic distortions caused by government currency controls, that were first put in place in 2003 to reduce capital flight.

ROZO: Rather than blaming Cucuta's money traders, Venezuelans seem grateful for their services. Take Cecelia Lozasa, who has crossed the border to change about $300. Her money changer gives her a slightly better rate than she could get on the Venezuelan black market, for accepting low denomination bills, which take up a lot of space. That means Lozasa must travel back to Venezuela with five plastic bags jammed with 20,000 bolivars. But she's thrilled to have the extra cash. For NPR News, I'm John Otis. Transcript provided by NPR, Copyright NPR.