Black Market Dollars
Ciudad Bolívar, Venezuela
A new country, a new currency, and a new travel twist.
El Presidente Hugo Chavez, with his great insight and wisdom, has decided that Venezuela's currency is going to be a strong one, and has officially pegged it at a rate that currently exchanging at about $2,150 bolivars for each U.S. dollar. Unfortunately, the reality is that the value of the bolivar is far lower than that; its strength is grossly inflated.
Working Venezuelans that get paid in bolivars and spend in bolivars probably don't think much about all this, but those who deal with the U.S. dollar and Euro—the merchants—are all too familiar with the discrepancy.
Here's an example of the problem: I want to buy a hot dog on the street. The going price for that item in this city is VE$2,000. But how much does that amount mean to me, a foreigner, converting foreign currency over to spend locally? The answer is an interesting one: It depends.
What if I told you that most every traveler who bought the exact same hot dog paid a different price for it? If your bolivars were dispensed by an ATM, you got the Chavez exchange rate, and you'd be paying about US$0.93 for your wimpy piece of "meat." Same goes for travelers checks. But what if I told you my hot dog cost me US$0.59—close to 40% less than yours?
This "savings" is a result of the hard currency vacuum in Venezuela, and has provided the perfect environment for the black market step in and make a profit.
The crazy thing is that the amount of bolivars a U.S. dollar will get you on the streets of Venezuela fluctuates wildly. I was trying to research what the rate should be, and both news articles and traveler messages left on forums describe an exchange that jumps anywhere between VE$2,500 and VE$4,000 per dollar traded (in the last six months). Recent legislation Chavez passed earlier in year seems to be part of the cause.
Arrival And The Great Hunt
Today is my first real day in the country. I arrived in the city at 1:30 this morning, 35 hours after leaving my hostel in Manaus. This time of morning at a bus terminal in any country is not where you want to be, and especially so in Venezuela.
I had a slight problem though—I didn't have any of the local currency. I had no opportunities to exchange my Brazilian notes as I passed the border, and no one was willing to take them off my hands this far away from the frontier.
On a highly alerted level I chanced walking across the street from the terminal to a bank (while taxi drivers hollering at me from most directions), but the ATM was either out of service or out of cash; I was out of luck. What to do.
I had prepared for an incident like this by pocketing some low domination U.S. dollars to use for cab fare ahead of time. Naturally there were no meters in the taxis, so the haggling began. Although the price was important, making sure I came off as someone that wasn't going to let himself get driven down an alley to be robbed or worse in the early morning hour was more pressing.
I am so wildly happy to be back in a Spanish-speaking country—I am verbally powerful in the communication department again. I do not come off as fresh.
I had written down the first hotel entry out of my guidebook on a piece of paper for the cabbie—I wouldn't be caught fishing through a guide book in front of these guys. At the destination there was no answer to the door (at the early hour of morning), so we moved onto the next posada on the list, where a sleepy, but very happy, old man let me in. The driver received US$5 for the ride (and not trying anything funny).
I can't afford a room at the Posada Don Carlos, but I can afford to sleep in a hammock on the spacious 2nd-story patio inside the establishment.
Getting money was the priority today. The plan was to first try for a black market exchange, but if that didn't work out I'd hit an ATM. The catch was it was a Sunday—Palm Sunday, to boot—and most everything was closed.
There were no money changers idling around the banks because the banks were closed. Every ATM I hunted down was out of cash. I spent several hours wandering around, hungry and thirsty, before I found a fellow who was willing to take me to a shoe store to make an exchange with the owner behind the register.
We couldn't agree on an exchange rate though. On the street the guy said I'd get VE$3,100 for my dollar, and I laughed at him. Getting $3,200 seemed more common, but I wasn't budging. Inside the store $3,300 appeared to make the proprietor uncomfortable, and when we finally settled on $3,400 per dollar, he wasn't so pleased. So much so that when I told him I didn't have a single US$100 note to exchange that he turned me down.
I wasn't budging from the VE$3,400 rate, and was turned down by two more store owners before one finally agreed. We both took a lot of time inspecting the notes to be exchanged. My crisp bills came straight from the mint—obtained in the USA in 2005—and had never been used.
One of the guys idling with the owner when we entered told me to hide the cash all over my body and to watch out on the street as I walked—the fellow that brought me there had left during the transaction.
Alert and defensive, I quickly made my way back to the posada without incident. More research on the black market exchange rate seems to indicate I received the correct amount for my dollars.
What Am I Missing?
Now what I don't understand is why I can't make a profit off of all this. Say I took another US$100 and swapped it on the black market for VE$340,000, and then took that to the bank and had them convert it back to U.S. dollars. Even with the 10% fee the bank will charge for this, that would still give me over US$40 in profit.
Why couldn't I just keep cycling the money like this? Use the same guy to flip the currency into bolivars and just rotate banks. In a single day I could make enough to live here for a month or two or fly to a distant continent.
I think it's quite interesting how using the exchange rate from the black market has such an impact on the price of things, and my attitude towards purchases.
It's not like I'm getting a better deal—Venezuela's prices (cost of living) are generally in line with the currency exchange rate I received on the street. It's the Chavez exchange rate that is totally out of whack, and screws travelers over.
It's costing me VE$15,000 a night to sleep in a hammock at this posada. The thought of paying US$7/night for this turns my stomach, but US$4.40/night for an open-air hammock for a bed with free Internet access in the hotel—that makes me smile. The 37% "discount" makes a world of difference.