Venezuela devalued its currency for airline tickets and incoming foreign direct investment as it attempts to halt the hemorrhaging of dollars that has pushed international reserves to a 10-year low.
Airlines will be reimbursed for ticket sales at the exchange rate used at weekly auctions, which last sold dollars at 11.36 bolivars, compared with the official rate of 6.3, Economy Vice Minister Rafael Ramirez told reporters inCaracas today. Venezuelans traveling abroad and foreigners sending remittances overseas will also buy dollars at the auction rate, he said. The bolivar is trading at 78 on the black market.
“We don’t have the ability to give preferential rates for travel,” said Ramirez. “We can’t take away dollars from medicine imports to give them to travelers.”
Airlines have an equivalent of $3.3 billion in bolivars in Venezuela, which they can’t expatriate because of exchange controls, according to the International Air Transport Association. Payment delays led Madrid-based Air Europa to suspend sales this month, while other airlines have reduced sales in bolivars.
After previous devaluations, the government honored the old rates for existing debts with carriers, said Humberto Figuera, president of the Venezuela Airline Association. Ramirez said the government will review the rates for its debts with the private sector.
“Venezuela has a lot of dollars coming in from oil sales, but its accounts are not clear and its hard currency situation could be worse than we think,” David Smilde, senior fellow at the Washington Office on Latin America, said in an e-mail. “This could indicate that the dollar shortage is getting critical.”
The country’s largest private food producer, Empresas Polar, warned today that they can’t import more raw materials, equipment and packaging because authorities are delaying the release of dollars. Polar produces everything from beer to corn flour.
The government stopped publishing scarcity statistics in November, after the previous month’s data showed about one in five basic goods was out of stock at any given time.
Venezuela’s benchmark bond due in 2027 fell to the lowest price in two years, reaching 70.68 cents on the dollar at 1:58 p.m. in New York. The yield on the bond rose 10 basis points to 14.16 percent.
President Nicolas Maduro said on Jan. 15 food imports and medicine will continue to receive dollars at the preferential rate. Students going abroad and pensioners will also continue paying 6.3 bolivars for the dollar, Ramirez said today.
Increasing the amount of dollars that get exchanged at the higher auction rate amounts to an indirect devaluation, according to Barclays.
After today’s announcements Venezuela will hand out between 26 and 38 percent of dollars at the auction rate, the Barclay’s analyst Alejandro Grisanti said by telephone from New York.
“The government has done too little and too late to reduce the currency distortions,” Grisanti said. “This partial devaluation means more money printing by the central bank to finance the government.”