How To Get Your Money OUT of Venezuela
In order for
clients to understand the exchange controls and understand why
there is basically only one way to legally get money out of
Venezuela, we need to explain a few points:
First, the government of Hugo Chavez
instituted exchange controls in 2003 to PREVENT money from
being taken out of Venezuela without official approval.
That's what exchange controls are for and preventing people from
taking their money somewhere else is why they are put in
place. The exchange control laws state that:
- Only the Central Bank can
exchange* money (see explanation
below)
- The official exchange rate is 2.15
Bolivares per Dollar
- Anyone can freely bring money
into Venezuela, and the money is automatically exchanged at
the official rate of 2.15
- There are severe restrictions placed
on the ability to take money out of
Venezuela.
Because the businesses and the National
Companies import and export goods and services, there is a mechanism
by which Venezuelan individuals and businesses can exchange their
Bolivares for Dollars at the official rate of exchange. This
is highly regulated by a committee known as CADIVI, who will either
approve or reject any solicitations to purchase Dollars from the
Central Bank at the official exchange rate. At this point in time CADIVI has almost completely
stopped approving the purchase of foreign currency for anyone except
government entities and importers of vital medical and food
supplies, so Venezuelans should just forget about getting the
official rate of exchange.
Foreigners with money in Venezuela
that have a Qualified Foreign Direct Investment with a
certificate of foreign investment issued by the Superintendent of
Foreign Investment (SIEX), are able to request that CADIVI
approve the expatriation of their money at the official
rate through the Central Bank, but it doesn't mean that they
automatically get their Dollars. If you have to ask what a
Qualified Foreign Direct Investment is, you don't have it and you
aren't going to get it at this point. If you have a
Qualified Foreign Direct Investment in Venezuela the laws guarantee
you the right to repatriate your profits and capital, but the law
doesn't require the Central Bank to work on your
timetable. The Central Bank doesn't have the Dollars and
CADIVI isn't approving solicitations. It's that
simple.
The official rate of exchange is not available except
under highly regulated conditions and is currently
almost IMPOSSIBLE to obtain.
To state this in blunt terms: if
you don't already know exactly how to get the official rate of
exchange, what forms to fill out, who to call to ensure
that your solicitation will be approved and how much it's going to
cost to get that approval... then you cannot buy Dollars at the
official rate of exchange. If you cannot get the official
rate, what are your options?
PLAN B
There is another option for legally
taking money out of Venezuela, and that's what is known as the "swap
market." Remember when we said that the exchange control laws
declare that only the Central Bank can exchange money? Well,
as it turns out, it isn't that simple.
When the National Assembly wrote the
exchange control law they did not include debt and equity swaps
in their definition of currency exchange. Because this is a
Civil Law jurisdiction (as opposed to the Common Law system of
jurisprudence which is used in virtually all of the English
speaking countries), that which is not specifically forbidden is
permitted. Judges do not have the power to change the law
through judicial decisions. Therefore, since the
exchange control law did not specifically include debt and equity
swaps in the definition of currency exchanges... a "parallel market"
has grown in the past few years that uses a system of debt or equity
swaps to effect the legal exchange money at something other
than the official market rate.
Most brokerage houses (Casas de Bolsa)
now have a seamless exchange service that effects a bond swap to
exchange money. Essentially the client's money is used to
purchase bonds, swapping those bonds for a different set of bonds,
and then selling the second set of bonds for a different currency on
the other side of the transaction.
- Money (Dollars) entering
Venezuela would be used to purchase Dollar-denominated Bonds,
which are then swapped for Bolivar-denominated Venezuelan Bonds,
and the Venezuelan Bonds are sold for Bolivares which are
deposited into the clients account.
- Money (Bolivares) leaving Venezuela is
used to effect the transaction in reverse: Bolivares are used to
purchase Venezuelans Bonds, which are swapped for
Dollar-denominated bonds, which are sold for Dollars outside
Venezuela and the Dollars are wired to the client's foreign bank
account.
The critical point is the question
of how the bond swap is valued. What are Venezuelan Bonds
worth in terms of US Dollar denominated bonds? There has to be
an exchange rate to value the transaction, and this is where the
swap market exchange rate comes from: it's established by supply and
demand in an open market setting. This relative value takes
into account the strength of the Venezuela economy, the political
situation, the accumulated inflation and a few other factors, but
supply and demand rule the market. For years the demand
for Dollars has been higher than the demand for Bolivares, but
occasionally the government (PDVSA) manipulates the swap
market. There is a graph of the past few years swap market
prices here.
The so-called "Black Market" consists of
private individuals and businesses that simply exchange Bolivares
and Dollars in violation of the exchange control
laws. These transactions are now punishable by jail terms
and large fines... although it appears that the government
knows exactly who the large private exchange operators are and
does nothing about it. Private exchange operators tend
to be people who have sufficient working capital and a lot of
contacts. They know people who need to buy and others who need
to sell, and they effect the transaction for a fee that is expressed
as the difference between the buy and sell price (the spread).
The black market usually takes it's prices from the swap market, but
isn't bound by the swap market prices.
The combination of both the legal swap
market and the illegal black market is collectively known as the
parallel market. The swap market is legal, the black market is
illegal, they both do the same thing... and it may appear to
be an insane arrangement that one is legal and the other is
illegal... this is Venezuela and that's the way it is.
We don't justify, we just point out that this is the current
situation.
How do I get my money out of
Venezuela?
If this is one-time
transaction, call or email us to discuss the amount of
money and the exchange rate. We'll provide you with the
deposit details for the bank account of the Casa de Bolsa, you'll
deposit your funds with the Casa de Bolsa and when the funds clear
you will receive a wire transfer to your account outside
Venezuela. Minimal paperwork is involved, and it's
possible to exchange your money within minutes of contacting
us. This transaction requires that the money be deposited in
the account of the Casa de Bolsa prior to locking in an
exchange rate. We can quote an exchange rate at any
given moment, but we cannot close the deal until the money is
deposited and we have the number from the deposit slip. If
this is what you need, contact us to
exchange your Bolivares for Dollars.
- The minimum outgoing
exchange transaction is One Thousand
Dollars ($1,000.00) and there is a $30 wire transfer fee
deducted from the amount exchanged.
- The exchange rate quoted at the time
the transaction is closed is the exchange rate you get.
There are no other fees or expenses.
If you need to exchange money on
an ongoing basis, we'll send you the account opening forms
and list of supporting documentation via email. When you've
got the forms filled out and the required documentation (bank's
letter of reference, utility bill, copy of passport, etc.) ready you
can scan and email these documents to get your account opened and
then send the originals by courier or mail.
- It typically takes at least a week to
10 days to get an account opened. If you need to exchange
money prior to that, contact us.
- If you have concerns about your
liability to SENIAT or other tax issues, we can discuss this with
you as well.
Once your account is opened, you'll have
to call or message to discuss the amount to be exchanged and the
exchange rate. Upon confirmation of the amount and exchange
rate we'll close the deal and lock in the exchange rate, you'll
deposit the money and we'll email you the required transaction
confirmations which you'll have to sign and send back to
us. You can scan and email us the signed documents or FAX
them, it doesn't matter. When the funds clear in Venezuela and
we've received the signed transaction confirmations back from
you, a wire transfer will be sent to your account outside
Venezuela. If you'd like to open an account with a Casa de Bolsa, email us to get the forms. What is the real rate of exchange? We are constantly contacted by people who say "the exchange rate of the black market is ridiculous. How can I get the real exchange rate?" The answer is simple: the rate of exchange on the swap market IS the real exchange rate and there is now NO OTHER EXCHANGE RATE. As Venezuelan investment banker Miguel Octavio put it: "Venezuela is living a sort of suspended animation. Only a few months ago, suggesting that there would be no devaluation by July would have seemed nuts, but here we are less than ten days from July 1st. and as I expected, the “official” rate of exchange remains at Bs. 2.15 per US$. The worst part is, that the longer it is held fixed, the bigger the explosion will be in the end. As Chavez hopes for a recovery of oil prices, the truth is that nothing will save him now. Oh yes, oil prices are up to US$ 70 per barrel, but the average price of the Venezuelan oil basket, so far this year, is roughly at US$ 50 per barrel, a level impossible for the Venezuelan economy to be sustainable for the remainder of the year. What is likely to happen, is that the economy will shrink dramatically in the second half of the year and that demand will simply collapse. As importers go to the swap market (even pharmaceutical companies are not getting US$ at Bs. 2.15), prices will jump so much that people will not be able to buy stuff (and will get unhappy!)..."
We believe that anyone who is thinking of exchanging their Bolivares for Dollars should do so quickly.
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Real Estate Development
