The official exchange rate between Venezuelan Bolivers and American dollars is 6.3 to 1. Legally you can exchange dollars into Bolivars at that rate, but there are tight restrictions on the ability to buy dollars with the local currency.
In fact, the black market rate is apparently closer to 44 to 1.
However, it’s apparently now possible to buy up to US$3000 with Venezuelan Bolivars at the official exchange rate in conjunction with an international airline ticket.
So Venezuelans are making money through arbitrage — buying airline tickets they do not intend to use, for the right to buy US dollars at a massive discount relative to what those dollars can be sold for on the black market.
Many don’t take the flights, yet my own searches for space yield many days over the coming weeks where American’s Miami and New York flights are completely sold out in coach and a handful of days where only a seat or two is available at full fare.
And traveling abroad itself can be done at a profit.
Credit cards are used abroad to get a cash advance — rather than buying merchandise. The dollars are then carried back into Venezuela and sold on the black market for some seven times the original exchange rate.
The large profit margin easily absorbs the cost of flights and accommodation for a trip.
“I’ve been able to buy new clothes and give some cash to all my closest family members!” said one delighted Venezuelan lady, just back from a trip to Europe.
“It was really easy. There was a guy in a hotel room with 10 point-of-sale machines who swiped my card for $1,000 each day,” said a Venezuelan pensioner, also asking not to be named as he described his trip to a Caribbean island.
Many, though, don’t even take the trip. They exchange up to the allowed US$3000 limit and then also send their credit cards abroad to be used for cash advances.
Some Venezuelans do not even bother leaving the country, but merely send their credit cards to friends overseas, who swipe the cards and send the cash back to Venezuela.
“This is the reason many airlines are sending half-empty planes,” Ricardo Cusanno, head of a local tourism council, told Reuters, saying the government should cross-reference flight lists with those requesting foreign exchange to outwit the no-shows.
As a result of the high level of unused seats, some airlines are beginning to overbook at much higher rates than usual.
(HT: Tyler Cowen)