Venezuela announces end to exchange controls after 16 years

For years, Venezuela has had a flourishing black market in which dollars are sold for more than the official rate, currently at 5,200 bolivares to the dollar. (File Photo: Jorge Andrés Paparoni Bruzual/Flickr, CC BY-SA 2.0)

CARACAS, Venezuela — Venezuela has lifted foreign exchange controls on banks for the first time in 16 years, but some observers were skeptical Monday that the measure will do much to lift the shrinking economy.

Few people lined up at money exchange windows in private banks in Caracas to take advantage of the new policy. One man, Rodolfo Gutierrez, said Venezuela’s hyperinflation is so severe that many people find it hard to buy dollars and are focused on buying whatever food they can.

Economist Asdrubal Oliveros said some private institutions struggle to do international transactions because of U.S. sanctions imposed in a campaign aimed at pressuring President Nicolas Maduro out of office.

“An exchange control can’t be lifted by decree. There have to be the conditions for it,” Oliveros said.

The exchange controls were imposed by Maduro’s predecessor, Hugo Chavez, following an attempted coup in 2002.

The Venezuelan government took steps in August to loosen controls, allowing people and companies to buy and sell dollars through exchange houses subject to regulations on the price and amount. But the measure had little success due to the scarcity of foreign currency. For years, Venezuela has had a flourishing black market in which dollars are sold for more than the official rate, currently at 5,200 bolivares to the dollar.

Venezuela’s financial problems have intensified because of a sharp reduction in oil exports, a key source of foreign currency. The oil industry is under U.S. sanctions as Washington and its allies try to open the way for opposition leader Juan Guaido to replace Maduro, who says he is the target of a coup plot.

Russia is a key ally of Maduro. So is China, which delivered a planeload of 71 tons of medical supplies to Venezuela’s main airport Monday.

Venezuela’s humanitarian crisis has dragged on for years, prompting some 3 million people to leave the country for neighbouring Colombia and elsewhere.

On April 30, Guaido attempted to break the political deadlock by calling for a military uprising to overthrow Maduro. Key military leaders did not heed the call.