CARACAS (Dow Jones) – Venezuela’s bolivar lost ground Monday against the dollar in the country’s active black market for U.S. currency, pulled down by growing foreign currency demand.
The price of a dollar closed Monday between VEB5,010 and VEB5,110, according to Veneconomia, a local business publication, a new record for the Andean currency since President Hugo Chavez banned dollar trading four and a half years ago.
Chavez set capital controls on the economy in February 2003 to stem capital flight at a time of political turmoil and has left those restrictions in place since.
Demand for foreign currency continues to grow as a robust economy and generous government spending afford Venezuelans more disposable income to spend as they like.
Imports are up. Planes are often booked full as Venezuelans take advantage of the oil bonanza to spend their money freely. Consumers continue to buy record numbers of vehicles and homes.
The government allows citizens to access a maximum of $8,000 a year at the official rate of VEB2,150 per dollar, but consumers usually need much more and use the black market to supply that extra need.
The Chavez administration has turned to selling dollar-denominated debt in the local market to quell that hunger for dollars, but so far that strategy has failed to deliver. Debt buyers resell the paper overseas in exchange for cash, but then continue to convert as many bolivars into dollars as possible.
The latest dollar surge comes at exactly the same time as the government sells $1.2 billion of the Bond of the South III, the third installment of a debt instrument issued jointly with Argentina.