Venezuela’s Black Market – How Venezuela Inflation Made Me An Instant Millionaire!
Black is the new green so it seems…
Money cannot buy happiness but it can buy some pretty damn compelling temporary substitutes. I know this because for 3 months earlier this year I was the richest kid in the neighborhood able to buy pretty much what I wanted. No, I didn’t receive and then squander a winning pools coupon I simply travelled to Venezuela where a bustling black market for foreign currency made me an instant millionaire who literally needed a backpack to carry my money around.
I am not an economist and the chances are that neither are you so I will keep this as simple as possible. Basically, in a (not entirely successful) bid to control their own economy and ensure income equality Venezuela’s Socialist government zealously (ie artificially) fixes the exchange rate of its currency, the Bolivar Fuerte and carefully regulates the amount of foreign currency available within the country. These unrealistic and unenforceable controls have simply driven currency trading underground resulting in the illegal “mercado negro” for dollars and euro’s (but especially dollars).
Before I entered the country I heard conflicting information about the correct legal position regarding dollars with some advising that they were outright banned and would be confiscated if found. Perhaps this simply meant that corrupt officials had a tendency to put their hands in tourists pockets but either way I took all due precautions and hid my dollars very carefully in my pack before I crossed the frontier in case I was stopped and searched by the National Guard. As it happened I entered without incident which was kind of disappointing as I was up for having the sheer ingenuity of my hiding places tested out.
When I entered Venezuela in January the official exchange rate was 6.5Bsf to $1US and had I used my bank or credit card this is what I would have been charged at. Let’s give this some context, an almuerzo (a satisfactory but unspectacular set lunch) at the time would cost between 250 – 300BsF in Caracas which means up to $46 which is of course completely ridiculous. However, the Venezuela black market exchange rate at the time was 180Bsf per Dollar which made things altogether more affordable.
The Crazy Venezuela Currency Exchange
During my time in Venezuela, the government did take action to curve the black market and introduced dual rates which meant that the official exchange rate for international banks cards etc became a more realistic 179Bsf. However, this was quickly leap-frogged as the black market galloped up to 200 – 300Bsf. The largest denomination available is the 100Bsf bill so if I changed say $50 into 10,000 Bolivars you can probably imagine the resulting brick wad of cash I would receive especially if I was paid out in 20’s!
Of course, the thing with a black market is that it’s unofficial and unregulated and just because you “should” be getting 300Bsf doesn’t mean you will as you still need to find somebody who is actually willing to pay that. The prevailing black market rate appears to be driven by a dubious website called “dollar today” (who the government has vowed to hunt down and imprison). I never managed to work out how they calculated the black market rate but as a matter, of course, the rule seemed to be that if they said the rate was 300Bsf you might be able to get 250 and 280 if you were lucky and negotiated hard.
The dollar today website is vehemently anti-Government, anti-Socialist and anti-Chavez causing some commentators to suggest that they are manipulating the rate to undermine the government and indeed the rapid rate of increase from 180BsfF in January to 700Bsf this month does seem very drastic. Argentina also has a Black Market for Dollars although the rates are generally 150% of the official one rather than 1000+% percent Venezuela has.
So who were the black market traders on the Venezuela black market? The name may inspire images of gangsters working out of dingy backrooms where transactions are watched over by rent-a-thugs but the reality could not be more different. The traders were generally (otherwise) legitimate business owners who operated from their hotels, bakeries, shops or offices. My favoured trader in Merida operated a fantastic service, they were pleasant, offered coffee whilst you waited and even accepted bank transfer which became invaluable after I changed the $200 in cash I snuck into the country. But of course these people were criminals as was I and we were arguably undermining the economic stability of the country. This did play on my mind from time to time but I placated myself with assurances that I was spending money there and boosting the local economy; furthermore, the reality was that if not for the black market I could not have afforded to remain in Venezuela for any length of time at all.
Pro’s and Con’s
As a tourist, changing my currency made Venezuela into one of the cheapest destinations in the world. I had nights out including entire bottles of rum, taxi’s and juicy burgers for under £5 and internal flights for £15. But what about the Natives? How do the black market and spiraling exchange rates affect them? Well if you want to buy dollars illegally you obviously need to have a hell of a lot of BsF to buy them with whereas most Venezuelans simply don’t.
On the other hand, the government does subsidise the legitimate sale of dollars to its citizens who can buy up to $2000 a year at the official rate of 6.5. This is extremely favourable to them meaning they can afford to holiday. I heard anecdotal evidence of willy Venezuelan’s taking full advantage of this by buying their quota of official dollars at 6.5 and then immediately re-selling them on the black market. However, I also heard counter anecdotal evidence that in practice the subsidised dollars were very hard to obtain and even if one could negotiate the bureaucratic minefield which was the application one still had to be very lucky to get anything.
Whilst I naturally avoided the official exchange rate like plague whilst in Venezuela, it did actually come to my aid when returning home. Whilst in Merida I used my relative wealth to courier some personal artifacts home via a well-known courier which were subsequently damaged in transit by customs officials purportedly inspecting them for drugs. The courier refunded my costs (some 500Bsf which had, in reality, cost me $3) at the official rate meaning they credited $76 into my account!
Inflation in Venezuela
Venezuela has seen high rates of inflation in the last few years. My French landlord in Merida said that when he moved to the country 4 years a beer was 4 BsF whereas by March of this year it had risen to 40Bsf. That said the rise of the black of the market far outstripped the inflation I was seeing on the ground meaning that anybody with access to foreign currency just gets richer and richer.
My time in Venezuela was largely blissful which is because of the beautiful country, the amazing people I met but also because the black market made me rich for the first time in my life and able to eat and party wherever I wanted whenever I wanted. I am truly envious of any travellers there now as the exchange rates of 700BsF (provided you can actually get that) would open up even more possibilities (a motorbike could probably be bought for $100!) for a whole lot of fun. So, if your thinking of heading to Venezuela, then fill a suitcase with dollar bills and get trading on the Venezuela black market!
Update for September 2018
I initially wrote this article in June 2015. Since then, the hyperinflation in Venezeuala continued. The government took several measures to curtail the situation all of which failed. In August 2018 the Government issued a new currency, the Bolivar Fuerte which saved 5 zero’s of! Prior to this, it apparently required a suitcase full of bank notes to buy even a bag of rice.
I have not returned to Venezuela since the new currency was introduced so cannot comment on how it has impacted the Black Market for US dollars.