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US-wary Venezuela opens up to tourist dollars
<span style="line-height: 16px; font-family: arial, sans-serif; font-size: 13px; color: #888888; background-color: #f1f1f1;">Venezuela Marriott Hotel Playa Grande. (Photo: www.tripadvisor.com)</span>
News
September 10, 2016

US-wary Venezuela opens up to tourist dollars

CARACAS, Venezuela (AFP) – A cash crisis has forced Venezuela’s socialist government to ease its currency restrictions by letting tourists pay their hotel bills in dollars with bank cards.

Recent foreign visitors to Venezuela have got used to cramming into their pockets and backpacks unwieldy wads of bolivars, the local currency.

President Nicolas Maduro has accused the United States of waging “economic war” against his country. The Venezuelan government controls the supply of dollars, outlawing transactions in greenbacks and fixing an official exchange rate.

But it needs dollars to buy crucial imports — and the economic crisis that erupted in 2014, causing food shortages, riots and looting, has left it dangerously short of greenbacks.

“It needs foreign currency and is looking at all the ways it can maximize its dollar holdings,” said Asdrubal Oliveros, director of the consultancy Econanalitica.

– Hotels need dollars –

The luxury Eurobuilding hotel in Caracas in June became the first to start charging in dollars under the new scheme.

Meanwhile on the country’s top tourist destination, the Caribbean island of Margarita, hotels are rushing to get the paperwork done.

“It was essential that they permit this kind of transaction so tourists can pay with their credit cards and so hotels can get the dollars for what they need to import,” said the president of the Margarita hotels’ association, Martin Espinosa.

– Limits of tourism –

The measure came into force six months ago but the complex banking procedures needed to get permission to charge in dollars take time.

The hotels may keep 40 percent of the dollars they receive to buy imported goods for running their business. The rest they must sell to the central bank.

Analysts are skeptical about how much good it will do.

Venezuela received about a million foreign visitors in 2014, before the worst of the crisis hit.

If each of those spent $100 a day for a week, as the government estimates, that could bring in hundreds of millions of dollars a year — a fraction of Venezuela’s $12.5 billion of overseas commercial debt.

Despite the attraction of the country’s pristine beaches and mountains, the number of visitors is expected to decline as violence and instability mounts.

“Tourism is not one of the main generators of foreign currency” in Venezuela, said Oliveros.

“It will not provide a long-term solution.”

– Inflation –

Foreigners visiting Venezuela used to live like kings, changing their dollars into bolivars at the black market exchange rate.

But high inflation has now all but wiped out that advantage, sending prices in shops and restaurants soaring.

Tourists risk paying more if they use their bank cards to pay for services billed at official exchange rates.

“This is going to be a disadvantage to tourists. They benefited in a way from the difference between the official rate and the black market rate,” said Oliveros.

“So a lot of people now might think twice before coming.”

– ‘Unsustainable’ currency rules –

The government fixes a low exchange rate for the purchase of essential goods, but those are in short supply at official shops. Black market retailers sell them at big mark-up.

The International Monetary Fund forecasts that inflation in Venezuela will top 700 percent this year.

“The exchange rate controls have exploded. They are no longer sustainable,” said Angel Garcia Banchs, director of the consultancy Econometrica.

“What we are seeing now is an experiment. It will not substantially change anything.”

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