Via Economic Policy Journal

Bloomberg reports:

U.S. dollars are everywhere in Venezuela, and suddenly that’s a problem.

The greenback is steadily gaining currency in this inflation-wracked country, where a single dollar buys about 60,000 bolívares on the black market. That’s creating challenges for local businesses, because Venezuelan banks are barred from offering foreign currency accounts.

For safekeeping, an insurance saleswoman in the western town of San Cristóbal tapes stacks of dollars from clients to the inside of a toilet tank in her office bathroom. A general contractor, unable to wire cash to his accounts in the U.S., flew his elderly mother and wife from Caracas to Miami with $9,900 of cash each, just under the limit required for reporting money to U.S. customs authorities.

“This is money earned through legal means, yet in a currency that exists entirely outside the country’s constitutional order. This isn’t money laundering,” says Luis Godoy, a former deputy chief of the judicial police who now works as a security consultant. “You have to wonder how many people right now have money stacked inside their homes like Pablo Escobar.”…

Increasingly, the bolívar is used mostly to pay for a few subsidized goods, such as subway tickets and gasoline, that cost less than a penny a tank in the former petrostate. The dollar has crept in for almost everything else. Hairstylists and window washers quote their prices in dollars. Juice and hot-dog stands in Caracas are adorned with signs advertising that they accept payment in dollars or via Zelle, the U.S. peer-to-peer payment system…

While President Nicolás Maduro railed against the idea of officially swapping the bolívar for the U.S. dollar last year, equating it with a surrender of sovereignty, he thanked God for greenbacks in a November interview, crediting their increased use with an economic recovery and resurgence of production…

For now, though, the dollar remains in a dangerous gray area: heralded by the president, yet mostly outside the rule of law. “The government has turned a blind eye to this,” says Gómez, the store owner. “Now we’re living with ropes around our necks, like fugitives.”

RW

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