Increasing Venezuelan dollarization (May 28, 2015)

As the value of the Venezuelan bolivar continues to plummet on the black market, the country is effectively dollarizing its economy.


Despite reports of shortages and monumental lines for basic goods in Venezuela, it's still possible to buy new cars, rent expensive apartments and get airline flights out of the country, according to the AP. However these goods must be paid for in dollars. The Wall Street Journal notes that obtaining airline tickets, many medications and even sea food also increasingly means paying in dollars.

A series of complex currency controls in Venezuela, put in place to prevent capital flight, restricts access to dollars, and is exacerbating class divisions, explains the Wall Street Journal.

In real estate in particular many vendors are demanding dollars, or the black market bolivar equivalent, which is several times the official rate. This despite the fact that Venezuelan law prohibits these transactions in foreign currency. The AP reports that Caracas real-estate agencies have created a password protected website to list properties at dollar prices.

Ford's production fell 90 percent due to difficulties in obtaining dollars to import parts. Currently clients must transfer dollars in advance to pay for the importation of necessary parts to assemble the cars in Venezuela, according to the AP.

But a recently announced agreement between the government and Ford, which would allow the company to sell new SUVs and all terrain vehicles in dollars is leading some to question how far the government will go in permitting this parallel dollar economy.

Though President Nicolás Maduro's discourse continues to go against the greenback, he and other officials sometimes make reference to the dollar's value, reports the Wall Street Journal. For example Maduro recently told a poor family receiving a state-constructed house that “while I’m giving you an apartment, I’m also giving you a check for $50,000, the dollars that belong to your children.”

But economic (and political) woes have not led to a united opposition front. Jailed Venezuelan opposition leader Leopoldo López is calling for protest marches against the government this Saturday (and backing his demand with a hunger strike). But  but the main opposition coalition is not endorsing the protest, reports the AP, showing cracks in the opposition to President Nicolás Maduro's socialist government.

International pressure to set a date for parliamentary elections has been mounting. Brazil should be doing more, argue Flavia Piovesan and Marino Alvarado Betancourt in O Globo. They note that discussion regarding Venezuela is difficult, due to the sharp polarization of visions regarding the long-standing socialist government: "for some, Venezuela is enduring a dictatorial regime, for others it's a paradise for the poor."

Though there have been valuable social gains since 1997, including land reform and increased university attendance, these are being eclipsed by homicides, shortages of basic goods and medicines, which are making life increasingly difficult for the poor.

Brazil -- and indeed Mercosur and UNASUR -- should be taking a stronger stance and acting as mediators in this situation they say. "The Venezuelan crisis challenges the role of regional and international organizations as democratizing actors to safeguard the democratic conquests and advance in human rights."

News Briefs

• Fourteen people, including FIFA officials, former officials and sports-television executives, were charged with racketeering, wire fraud and money-laundering conspiracies by the U.S. Justice Department yesterday. Twelve are from Latin America and the Caribbean says the New York Times, pointing to corruption in the hemisphere's soccer organizations' management. Of course, it also points to the popularity of soccer in the region, which is akin to a religion, says the Wall Street Journal. The indictment covers alleged crimes that took place over 24 years, and said soccer officials received more than $150 million in bribes and kickbacks from sports-marketing executives in exchange for broadcast and marketing rights, explains the Wall Street Journal. However some experts caution against underestimating soccer corruption in other parts of the world: Chuck Blazer, the former head of the federation that oversees soccer in North America, Central America and the Caribbean, played a key role in kickback investigation. 

• Illegal immigration into the United States has fallen to the lowest levels in the past two decades, reports the Washington Post. Undocumented migrants tripled between 1990 and 2007, reaching 12.2 million, but have since dropped by about a million people. Demographic data show that a typical undocumented migrant is now somebody over 35 who has lived in the country for over a decade. The drop is likely due to major investments in border security over the past couple of administrations, according to the piece.

• The suspension of aerial fumigation of illicit coca crops in Colombia is a game-changing step, but it must be followed with an innovative reform agenda, argue Kasia Malinowska-Sempruch and Diego Garcia Devis in the Huffington Post. "Colombia's government needs to implement policies that: Are developed in consultation with peasant communities; avoid forced eradication and allow a realistic amount of time for voluntary substitution; clearly define communities that have a historical relationship to coca, regulate their coca production, and provide them with models for coca industrialization; strengthen citizen security for these communities; protect and promote human rights; and make a special effort to address the socio-economic needs of peasant women, including those who were affected by sexual violence as result of the armed conflict."

• Argentina's stock index is one of the best performing in the world, reports the Wall Street Journal, saying hedge fund interest is "the latest sign of how investors are searching the world for opportunities amid super low interest rates and uneven growth in developed markets." But the boom is also politically motivated, investors are banking that October's national elections will bring a market friendlier successor to current President Cristina Fernandez de Kirchner. 

• Life for Latin America's nearly 20 million domestic workers might be tough, but wages and working conditions are better than those endured by  their counterparts in the Middle East and Asia, reports Reuters. The past decade has seen important gains in legal protections for domestic workers -- such as minimum wage, paid holidays, social security benefits, maternity leave and limits on working hours -- particularly in Brazil, Chile, Colombia, Uruguay and Argentina. One in every four women earning a wage in Latin America is a domestic worker, according to the piece.

• Reducing pension payments to widows is the latest budget saving measure passed by the Brazilian Senate, reports the Wall Street Journal. The measure, approved yesterday, together with another bill reducing unemployment benefits, will save the country some $4.8 billion.

• Chile's lower chamber of Congress will be voting on a medical marijuana bill next week. The project would authorize private citizens to grow up to six plants per household, and create permission to carry up to 10 grams for therapeutic purposes, but only under medical supervision, reports La Tercera.

• Eight isolated indigenous villages in central Colombia have had a functioning peace pact with the guerrilla FARC since 1996, reports the Miami Herald. Locals say it has saved perhaps hundreds of lives, and it's a pertinent example as the national government strives to reach a deal with the guerrilla group after five decades of conflict. The eight villages agreed not to harass FARC patrols or assist the military in exchange for a guarantee that the FARC wouldn't kill, recruit or lay landmines in the area. But one expert cited in the piece cautions that piecemeal pacts can't be applied on a national level, as they are difficult to monitor and lack international support.

• The FARC announced yesterday that one of its negotiators in the Havana peace process, known as Jairo Martinez, was among the 27 rebels killed last week in a government bombing raid. He had been on an "educational mission" according to a FARC leader.

• A turf war between two relatively obscure gangs in Guerrero state is behind thedisappearances earlier this month of up to 30 people in Chilapa. Los Rojos and Los Ardillos  are fighting to control the town because of its strategic importance to the regional drug trade, explains InSight Crime, which interviewed Guerrero expert and University of Alabama anthropologist Chris Kyle. The municipality has one of the only gas stations in the surrounding area, which means that whoever controls Chilapa controls the surrounding heroin production zones. "The violence in Chilapa is indicative of a broader trend in Mexico: the splintering of the country's traditional criminal organizations. After the Beltran Leyva Organization (BLO) began fragmenting in 2010, Guerrero's criminal underworld was left with a power vacuum, according to a January 2015 report Kyle prepared for the Wilson Center (pdf). New groups emerged, like Los Rojos and Los Ardillos, and began fighting over former BLO territory."

• El Confidencial says that relations are tense between the Nicaraguan government and the Chinese company slated to build the Grand Canal across the country. The Chinese concessionaire HKND, backed by tycoon Wang Jing, reportedly isn't coughing up the funds to indemnify owners of properties to be expropriated along the proposed 172 mile canal path. The environmental impact study is slated to come out soon, according to El Confidencial. In February the Scientific American published environmental concerns regarding the $50 billion project, including potential impact to unique wetlands and Lake Nicaragua.

• Rumors that women with dyed blond hair in Comayaguela's marketplaces would become MS13 targets have caused panic in Honduras. However, InSight Crime casts doubt on the veracity of the rumor, saying it seems an unlikely gang measure. However, the impact of the misinformation points to the trauma of a local population that is plagued with fear of gang violence, says the piece, as well as the intense gang rivalry that they are forced to coexist with.

• AirBnB has more than doubled its Cuba listings since launching on the island last month: more than 2,000 casas privadas are now offered on the site. It has become the most searched for location in Latin America, reports the Miami Herald. The success is due to a long-standing tradition of renting out private rooms in homes to tourists. There are more than 8,000 rooms for rent across the island, according to government statistics.

• Former Uruguayan Foreign Minister Luis Almagro took the office of the OAS Secretary General on Tuesday, replacing Chilean José Miguel Insulza. Almagro said that he would work towards making Cuba a full member of the organization again. In his speech, he emphasized that he is "... more concerned with seeking practical solutions to the enduring problems of our region than with rhetoric and stridency in statements guided by one ideology or another."