CARACAS, Venezuela, Monday September 12, 2016 – Until recently, tourists visiting Venezuela were obliged to lug around unwieldy wads of bolivars, the local currency.
Now, because of a cash and foreign exchange crunch, Venezuela’s socialist government has been forced to ease its currency restrictions by letting tourists pay their hotel bills in US dollars with bank cards.
Although the Venezuelan government controls the supply of US dollars, outlawing transactions in greenbacks and fixing an official exchange rate, it desperately needs dollars to buy vital imports.
According to Asdrubal Oliveros, director of the consultancy Econanalitica, “It needs foreign currency and is looking at all the ways it can maximize its dollar holdings.”
In June, the Eurobuilding hotel in Caracas became the first to start charging in dollars under the new scheme.
Meanwhile, on the Caribbean island of Margarita, Venezuela’s top tourist destination, hotels are rushing to finalize the formalities.
“It was essential that they permit this kind of transaction so tourists can pay with their credit cards and so hotels can get the dollars for what they need to import,” the president of the Margarita hotels’ association, Martin Espinosa, explained.
While the measure came into force six months ago, the banking procedures needed to charge in US dollars are complex and time consuming.
The hotels are allowed to retain 40 percent of the dollars they receive to buy imported goods for running their businesses, while the rest goes to the central bank.
In 2014, before the worst of the crisis became entrenched, Venezuela hosted about a million foreign visitors.
If each of those spent US$100 a day for a week, as the government estimates, that could bring in hundreds of millions of dollars annually, but this would still represent only a fraction of Venezuela’s US$12.5 billion of overseas commercial debt.
The draw of the country’s beaches, scenery and historic sites is nevertheless now thought to be outweighed by the threat of mounting violence and instability, moreover.
“Tourism is not one of the main generators of foreign currency in Venezuela. It will not provide a long-term solution,” said Oliveros.
In the past, foreigners visiting Venezuela got big bang for their bucks, changing their dollars into bolivars at the black market exchange rate.
High inflation has now all but wiped out that advantage, however, with prices in shops and restaurants soaring.
Visitors are likely to pay substantially more if they use their bank cards to pay for services billed at official exchange rates.
According to Oliveros: “This is going to be a disadvantage to tourists. They benefited in a way from the difference between the official rate and the black market rate. So a lot of people now might think twice before coming.”
The International Monetary Fund forecasts that inflation in Venezuela will top 700 percent this year, making it the world’s highest.
“The exchange rate controls have exploded. They are no longer sustainable,” said Angel Garcia Banchs, director of the consultancy Econometrica. “What we are seeing now is an experiment. It will not substantially change anything.”
The move comes amid escalating political tensions as President Nicolas Maduro wards off pressure to hold a recall vote this year that could remove him from office.