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Wednesday 22 January 2020
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Tight controls under Maduro, TT money flows to the black market

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Every week, Maria Martinez sends her mother in Venezuela TT$700 to buy supplies.

That will cover food for about two weeks for four people, and medicine for her sick father.

Martinez, 25, who works in a supermarket in Port of Spain, uses the black market exchange systems for her transactions, converting TT currency to Venezuelan bolivars.

The money is deposited into her mother’s bank account two days later, in bolivars. Even though the black-market rate is better than the official one, it’s still not enough for some things.

"There are other expenses such as transportation, education, telephones, public services, that are covered with what I send the following week, but it is insufficient because everything increases per day.”

Martinez is among the just over 16,000 Venezuelans who were granted temporary residency in TT in June, with adults granted a work permit for six months, with the possibility of a further six-month extension. Just on Monday, migrants continued to collect registration certificates at immigration offices.

They work to send money to their families in Venezuela but the government's strict controls on the flow of foreign exchange makes it challenging to remit their earnings.

And despite economic sanctions and political tensions, the US dollar is coveted. The country suffers from hyperinflation – a rapid, and continuous increase in prices which leads people not to hold on to money because it constantly loses value; they prefer goods. US$1 is worth nearly Bs 50,000 (TT$10) in Venezuela today.

In an attempt to ensure that foreign exchange sent to Venezuela goes through the government, the country’s president, Nicolas Maduro, in 2018 authorised three entities – Zoom, Insular and Italcambio – to receive remittances from the international wire transfer companies Western Union and MoneyGram, in addition to the state electronic system, Patria Remesa.

In this January 2019 photo, a man holds bolivar-notes to pay a ticket at a bus station in Caracas, Venezuela. - AP PHOTO

The country’s persistent problems, though, mean there are sometimes delays in online transfers, and the daily fluctuations in exchange rates and inflation rates can be volatile, affecting value and buying power.

For example, a customer who goes to Western Union to send money to a relative in Venezuela, must first convert TT dollars to US dollars based on a TT$7.75 to US$1 rate given by the company. That money is given to the recipient in bolivars based on the rate imposed by the Venezuelan government, which is lower than the black market. Therefore, the customer loses through this system.

Also, many Venezuelans have not been able to open bank accounts in TT, which would allow another type of cross-border transfer, but it is difficult for migrants to comply with some of the local banking regulations, for example, proof of residence.

Therefore, people turn to the black market.

Martinez said, "For these reasons, we must look for the best rates, and those of the government do not generate confidence because everything is by prior registration and all that information is ultimately used by the government for political purposes."

The average monthly salary in Venezuela is Bs300,000 (TT$80).

A woman holds new bolivar-notes in downtown Caracas. - AP PHOTO

At the current black market rate, with TT$700 (Bs 3.3 million), a family can just about buy basic food, including rice, spaghetti, cornmeal, cheese, salt, sugar, two different types of meat, a carton of eggs, two or three chickens and vegetables.

So, like many of her compatriots living in TT, Martinez prefers the black market because the rate is better.

On Tuesday, Business Day discovered the black market rate was US$1 to Bs 46.850,32. The official rate, as mandated by the government, was Bs 43.651,16.

"It is a small difference, but through the black market it is also faster, and without the need to go to the offices of official companies," Martinez said.

Black market remittance transactions are negotiated directly between individuals.

"The (difficulties) that exist in Venezuela to receive packages or money from abroad have forced Venezuelans to devise measures so that their families receive help," said economist Carlos Gonzalez, in a telephone conversation with Business Day from Venezuela.

TT hundred dollar bills being counted. - Jeff K Mayers

In TT, as in other countries with many Venezuelan immigrants, people work for companies or have contacts that offer different exchange rates through messages on social networks.

“The intermediary company in TT receives TT currency and works with a team in Venezuela responsible for making the bank transfer (in bolivars) to the recipient – all without state intervention.

"It is an illegal system, but they have their strategies,” Gonzalez explained.

This process means there’s no real foreign-exchange leakage directly from within TT.

For people who offer this exchange service, the procedure is quick and simple, but careful.

“It's fast. The person contacts us, requests the currency exchange, and based on the rate of the day, we make the bank transfer in Venezuela. It usually takes a few minutes, depending on the banks where the customer has the account,” said Luis Perdomo, a young Venezuelan who works as an intermediary.

“It's a job. Our mission is to make sure the exchange is effective. It is a measure of help, both for those who request the transfer and for those who make it, because we have a small profit.”

The head of a black market operation can make 15 to 20 per cent of the value of money being transferred, and from that, the intermediary can make five to six per cent.

And so, it’s become highly competitive. Perdomo said while the volume of transactions has remained relatively stable, even after the TT government’s registration process and subsequent approval of short-term work permits earlier this year, the number of people offering exchange services has increased considerably.

Trinidadian economist and businessman Kiran Mathur Mohammed, a Newsday columnist, acknowledges that although TT's foreign-exchange input and output data are limited, there is a remittance level that might not expose this country to as much leakage of US currency as we may think.

“Many have been pointing to these remittances as a drain on foreign exchange. More capital leaving the country is never a good thing.

"But that is only half the story. Venezuelans also bring US dollars and other currencies when they arrive in TT: which injects much-needed cash into the economy and offsets part of the loss from remittances,” he said.

Some Venezuelans are injecting even more money.

“Data is sparse on the ground, but it is very likely that there is a net inflow of capital from Venezuelan migrants. That includes the wealthier ones – I know at least a few that have invested more than a million US dollars in TT.”

Capturing this data is difficult, but not impossible, Mathur Mohammed said. That is the first step in assessing the negative or positive impact of remittances on the TT economy and should be the responsibility of the Central Bank and the Ministry of Finance. Business Day was unable to find any recent data on remittances from either.

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