10 keys to understand what happens to the dollar in Venezuela

( Spanish) — Dollars, bolivars, Colombian pesos and euros. Multiple currencies circulate in Venezuela and it is often not easy to understand how they are used in the market and how it is convenient for you to use them. Whether you visit the country, live in Venezuela, or just want to know what’s going on from abroad, this is what you should know.

1. Everything is marked in dollars

Whether in supermarkets, hairdressers, restaurants or bodegones, prices are marked in dollars with the official rate of the Central Bank of Venezuela (BCV).

The economist Francisco Allen, manager at the Datanalisis company, explained to en Español that after the great blackout of 2019 there has been a “de facto dollarization” in the country, so it is common to see dollars, euros and dollars circulating on the street. Colombian pesos (the latter are mostly seen near the border).

The bolivar has progressively lost the three basic functions that money has: means of transaction, unit of account and store of value, which is why Venezuelans have lost confidence in their legal tender and have adopted other currencies to replace those functions, says Allen.

2. The shortage of change

If you pay with dollars in cash, there is no guarantee that they will have change to give you, since bills of 1, 5 and 10 dollars are difficult to find.

This happens for two reasons:

-The dollars that enter the country in cash are from export activities in informal markets, so the bills that arrive in the country are of high denomination.

-In addition, the Central Bank of Venezuela does not have relations with the US Federal Reserve, so it is not possible to replace the banknotes in circulation with others of a lower denomination, replace those that are old or broken, or inject dollars into the local market.

3. Cents are not used in the country

The use of cents in Venezuela is practically non-existent. Whether in dollars, euros or Colombian pesos, currencies are not an option that is contemplated in the short or medium term in the country.

4. Pay with multiple currencies

If there are no low-denomination bills, it is normal for businesses to offer you another product to adjust the account or transfer the difference to you via mobile payment, an operation that only requires your ID and phone number.

Another option is to combine payment methods, such as dollars, bolivars in cash and passing the card. Any such combination must be received. “One day they paid me 20 dollars in cash, a 100 bolivar bill and they transferred the rest, about 13.08 bolivars, by card,” Carlos Uzcátegui, manager of a restaurant in Mérida, Venezuela, told en Español.

5. The dollar and the euro are often worth the same

In Venezuela, it is common for the exchange of dollars to be 1 to 1, because despite the fact that the euro has a higher price, the dollar is easier to circulate and accept, since there are places that still do not accept the European currency.

6. Advantages and disadvantages of using other currencies in Venezuela

The economist Francisco Allen highlights the following aspects:

Advantages:

-They are more stable currencies than the bolivar and better sustain their purchasing power over time.

-They can facilitate transactions and price marking.

-A stability could be reached in general price levels, although the impact would be limited.

Disadvantages:

-There are still many limitations for the bankarization of currencies. Although there are custody accounts in the national bank, it is not allowed to make interbank transfers or within the same bank, so they only work as a kind of safe.

-Since March 2022, the Tax on Large Financial Transactions (IGTF) came into force, which represents 3% of operations carried out in foreign currency, so it is now more expensive to pay in foreign currency.

-The amount of dollars, euros or pesos that enters the country is limited, which leads to a deficiency and deterioration of the bills that circulate in the local market.

That is why people continue to alternate currencies according to their needs, as is the case of Daniela Vivas, a 21-year-old Venezuelan who makes her purchases in bolivars. “Before going out to buy, I take out the accounts and change my dollars to the amount I need according to the BCV rate,” she told en Español.

By paying this way you get rid of any problems for changes, damaged tickets, and the IGTF tax, which helps you save some money.

7. What is better to pay with?

The payment method will depend on many factors. The IGTF that applies to purchases in foreign currency is an important aspect to take into account, as is the limited acceptance of the euro.

The economist Francisco Allen recommends that for someone who comes from abroad it is better to have dollars, since prices are generally published in that currency, they are widely accepted and it is very possible that a business wants to receive euros at a 1 to 1 rate with respect to the dollar, something that would disadvantage those who own the euros.

Likewise, Allen explains that a good alternative would be to pay with an international credit card, and if it is a traveler’s card, free of commission for use abroad, the better, since paying with it does not incur the IGTF.

8. Is it practical to have a bank account in Venezuela?

In order to go out with peace of mind in Venezuela, it is important to carry several payment methods, so having a bolivar account in the country is desirable.

However, economics expert Francisco Allen recommends that the amounts deposited be handled with caution, as there could be a sudden change by the authorities that has a direct impact on the accounts.

That is why many Venezuelans keep their accounts in bolivars with amounts almost exact to what they are going to spend in the day.

9. How to save? better in dollars

Allen assures that it is better to save in dollars than in bolivars, since this way the value of money is preserved.

“If I save in bolivars, it may not be worth the same later. One day I can have the equivalent of US$20 and the next it can be converted into US$12,” Alejandra Hernández, a Venezuelan waitress, explains to en Español.

However, the economist also points out that in Venezuela there is “inflation in dollars”, where the currency is progressively losing its purchasing power. That is why he recommends putting any excess income to work, either through investment in the capital market, a venture, or the purchase of productive assets.

10. The exchange rate is “unpredictable”

“The oscillations are very varied and unpredictable, for example, during January the exchange rate in the parallel market increased 24.47%, while between March 1 and 31 it increased just 0.20%,” Allen explains.

The BCV official rate It is published daily (business days) and can be viewed on the bank’s website. This is the rate that governs operations in formal businesses, public entities and service payments.

For informal procedures (interpersonal currency exchange operations) the parallel rate is usually taken as a reference, which is updated twice a day and is published on social networks through public domain accounts, where the main one is Monitor Dollar Venezuela.

The idea of ​​adopting a single currency in Venezuela as current currency is still far away, since the economist Francisco Allen explains that there are still many restrictions on the access of foreign currency (sanctions, non-existence of agreements) to the country, so businesses, companies and consumers have become more flexible and tend to accept different means of payment.

Apps that are used in Venezuela to pay: Binance, PayPal, Zelle and mobile payment

To pay in Venezuela it is normal for you to hear any of these modalities. Here, what you should know.

Binance: It is a cryptocurrency exchange platform with the largest volume of users in the world. To create an account it is only necessary to enter the email and password.

“Binance allows me to have my money in USDT (a cryptocurrency anchored to the dollar) and exchange it immediately for bolivars,” says Venezuelan Anthony Zambrano, who uses this platform regularly.

PayPal: An online payment service that allows individuals and businesses to make electronic money transfers. With PayPal you can send, receive and hold funds in different currencies.

Zambrano indicates that PayPal should be used to sell and buy personal items and services, because if it is used for other types of transactions, there is a risk that the account will be blocked due to PayPal’s conditions and terms.

mobile payment: A digital service that allows online interbank payments using a previously associated telephone number. It can be done from the application of different banks such as BDV, BBVA, among others. It is comparable to Bizum in Spain.

Zelle: An online payment network in dollars that works with banks in the United States. It is very popular for its utility to buy and sell products in dollars. It is important to note that to use it it is necessary to have a bank account in the United States.

en Español’s Carolina Melo contributed to this report.