In an effort to get money out of Venezuela, airline ticket sales had been booked solid for months. However, following still more government restrictions on Venezuelan currency (known as Bolivars), some flights to and from Caracas were suspended today. One airline cancelled all flights.
Hyperinflation, and economic stupidity by the leftist government are both out of control. On the currency side, the official exchange rate is 6.3 Bolivars to the dollar. The exchange rate for foreign travelers was just set to 11.36 Bolivars per dollar. The black market exchange rate is 79 Bolivars per dollar.
No One Wants Bolivars
There is no demand for Bolivars. No one wants them. Venezuelans want US dollars, Euros, or gold. The Bolivar will soon be worthless. It nearly is already. This is hyperinflation in action.
Please consider Venezuela Bonds Plunge After Bolivar Weakened for Travel.
Venezuelan bonds plunged to the lowest in more than two years after the government announced the latest partial devaluation of the bolivar, this time for airlines and foreign direct investment.
Venezuelans traveling abroad, airlines and foreigners sending remittances home must use a secondary exchange rate determined at weekly auctions, Economy Vice President Rafael Ramirez said yesterday. The rate set at the latest auction was 11.36 bolivars per dollar, compared with the official rate of 6.3. Airlines operating in Venezuela fell and one carrier suspended flights.
The partial devaluation comes as the government attempts to halt a hemorrhaging of dollars that has pushed international reserves to a 10-year low. The announcement came on the same day that the country’s largest private food producer, Empresas Polar SA, said it can’t import more raw materials because authorities are delaying the release of dollars.
The country’s international reserves fell to $20.5 billion this month from more than $28 billion a year ago.
Maduro’s government sold $8.6 billion last year to finance travel, airlines and remittances, 19 percent more than in 2012, according to Ramirez.
Still, measured at the official rate, airlines have an equivalent of $3.3 billion in bolivars trapped in Venezuela that they can’t expatriate because of exchange controls, according to the International Air Transport Association. Ecuador’s state-owned Tame Linea Aerea suspended indefinitely all of its seven weekly flights from Caracas today because of payment delays, the company said in a statement today.
Food producer Polar said yesterday that authorities are delaying the release of $643 million dollars. In total, the government owes private companies $10 billion in foreign currency, according to Venezuelan business chamber Fedecameras.
“The companies will be lucky if the government pays them at all, at any exchange rate,” said Aura Palermo, currency controls specialist at Caracas-based AP Consulting Group. “Businesses can’t plan in any way now, as they don’t know when they can participate in the auctions and at what rate.”
End of the Line
The end of the line for the Bolivar is at hand. The leftist government nationalized oil reserves, and the result was an immediate collapse in production. The only way Venezuela can import anything is from dwindling US dollar reserves. When those run out, it’s lights out for the Bolivar.
Hyperinflationists believe the same thing is going to happen in the US. The idea is ridiculous. For more on the story, please see Venezuela’s Hyperinflation Anatomy; Army Storms Caracas Electronics Stores; Total Economic Collapse Underway; Could This Happen in US?
Mike “Mish” Shedlock