News reports that the parallel exchange market is paralyzed completely are inaccurate.
The “permuta” (swap) market in Venezuela is stalled for now, with the exchange rate holding at about BsF 8.20 to the dollar while everyone awaits the outcome of the Bolivarian regime’s attempt to control the currency’s price in the open market.
But a black market already is born, thanks to President Hugo Chavez and his gang of corrupt incompetents.
If Chavez keeps his vow to shut down the “permuta” market and centralize all foreign exchange transactions under the Central Bank’s oversight, the currency likely will go into a steep dive, and the “pueblo” will pay the ultimate price in terms of soaring inflation, and growing shortages of everything.
The regime can’t control the black market. By some estimates, Venezuelans have well over $150 billion deposited outside Venezuela in safe havens all over the world.
This comes as no surprise to anyone who has spent real time in Venezuela.
Venezuelans have been converting their bolivars into dollars avidly since Caracas Gringo first arrived in-country in 1973. But since Chavez became president the flight of capital has increased continuously every year.
Individuals and companies that need dollars or euro easily will find companies and individuals who need bolivars, and the black market will thrive even if the Chavez regime shuts down every financial brokerage firm in Venezuela.
Of course, since a black market entails higher legal risks and tighter availability of hard currency, the BsF’s exchange rate could crash through BsF 10 to the dollar before Christmas even if the regime continues adding new tiers to its current official multi-tier exchange rate system.
Caracas Gringo has spent time in Cuba, and traveled on the red side of the Iron Curtain during the Cold War to places like Czechoslovakia, Poland, Hungary and East Germany.
In these countries, there was a ridiculously artificial official exchange rate where no one with half a brain would trade. This was particularly true for regime thugs in Prague, Warsaw, Budapest and East Berlin in the early 80s. And it’s still so today in Havana.
But simultaneously, there always was a robust black market for hard currency in these cities despite punitive laws guaranteeing serious jail time for anyone nabbed buying or selling dollars or any other hard currencies.
Chavez says he will hammer the speculators, when in fact it is the “pueblo” that is already getting hammered, and is about to suffer much worse.
Chavez claims he will defeat the laws of the market and give ol’ Adam Smith a proper ass-whuppin’.
But the biggest potential loser is bound to be Chavez and his gangsters, which proves that no matter how black things might become, there’s always a silver lining to look forward to.