Venezuelan companies receiving cash are moving US dollars abroad: sources | Business and Economy News

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Venezuelan companies that have U.S. dollars to protect themselves from hyperinflation pay up to 7 percent to move those funds abroad, sources told Reuters.

Venezuelan companies that have cash to protect themselves from hyperinflation have started paying up to 7% to transfer these funds to foreign bank accounts, six people with knowledge of the Reuters news agency reported. situation.

Since 2020, the country’s banks have allowed companies to store US dollars in safes, offering refuge against the 3,100% inflation that was sweeping the bolivar currency. Accounts do not pay interest.

This year, banks and financial intermediaries began offering a service that converts cash into deposits in foreign bank accounts, in exchange commissions ranging from 4 to 7 percent of the amount transferred, according to the sources reported.

It is another sign of the continued advance of an impromptu dollarization after more than 15 years of socialist economic controls, a change driven by US sanctions that have largely cut Venezuela off from the global financial system.

The sanctions prohibit business with the government and state-owned companies, but do not block transactions with Venezuelan private companies.

“When you have an incomplete dollarization of the banking system, you need to look for ways to keep your business operational,” one source said.

The service allows companies in the retail, technology and pharmaceutical sectors to pay creditors and suppliers abroad, according to sources, who asked them not to identify themselves.

The sources refused to identify the banks and companies that carry out foreign operations or institutions where deposits are made, and noted that international banks already maintain strict restrictions on the flow of Venezuelan funds.

The Ministry of Information, the central bank and the banking regulator Sudeban did not respond to requests for comment.

Unusual service has emerged after US sanctions were specifically targeted at Venezuela’s central bank and many foreign banks have stopped the “corresponding banking” services that are often needed to transfer funds to borders.

Venezuelans are also increasingly using dollars and euros in cash for day-to-day transactions.

In March, 56 percent of transactions were made through bills in dollars or euros, according to the consulting firm Ecoanalitica, which estimates that a total of $ 2.3 billion in cash flows through the Venezuelan economy.

President Nicolas Maduro in 2019 ended restrictions following U.S. sanctions on state-owned oil company Petroleos de Venezuela (PDVSA) in early 2019, cutting cash flow to the government. Washington describes Maduro as the dictator who chose the 2018 re-election.

Maduro, who accuses the US of trying to oust him in a coup, has adopted dollarization as an “escape valve” for Venezuelans suffering from the economic crisis, who blames sanctions, despite the recession of Venezuela began long before Washington sanctioned PDVSA.

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