Venezuelan companies take money away from US dollars abroad: Sources | Business and Economic News

Venezuelan companies with US dollars to protect against hyperinflation pay as much as 7 percent to take those funds abroad, sources told Reuters.

Venezuelan companies that have money in their hands to protect themselves from hyperinflation have begun paying 7 percent to transfer those funds to foreign bank accounts, six people familiar with the situation told Reuters news agency.

Since 2020, the country’s banks have allowed companies to store U.S. dollars in deposits, providing protection from 3,100 percent inflation that destroys the Bolivarian currency. Accounts do not pay interest.

This year, banks and financial intermediaries have begun offering a service that converts money into foreign bank deposits, with exchange rates ranging from 4% to 7% of the amount transferred, sources said.

It is another sign of the constant progress of an improvised dollarization after socialist economic control for more than 15 years, largely a change caused by US sanctions that cut Venezuela off from the global financial system.

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

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

The service allows companies in the retail, technology and pharmaceutical sectors to pay their creditors and suppliers abroad because they have been asked not to be identified, according to sources.

Sources have refused to identify the banks that carry out operations and the foreign companies in which the deposits or deposits are made, and have stated that international banks are already maintaining severe restrictions on the flow of funds from Venezuela.

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

An unusual service has emerged after U.S. sanctions specifically targeted the Venezuelan central bank, and many foreign banks have shut down “correspondent banking” services, which typically require funds to be moved across borders.

Venezuelans are also increasingly using cash and dollars for daily transactions.

In March, 56% of transactions were made using dollar or euro bills, according to Ecoanalitica consulting, with a total of $ 2.3 billion in cash in the Venezuelan economy.

In 2019, President Nicolas Maduro suspended the cuts in 2019 for sanctions imposed on the U.S. oil company Petroleos de Venezuela (PDVSA) by cutting the coffers of the government. Washington has said Maduro is the dictator who revived the 2018 election.

Maduro, who accuses the United States of wanting to stage a coup, has taken dollarization as an “escape valve” for Venezuelans suffering from the economic crisis, which he blamed for sanctions, even though Venezuela’s recession began long before Washington sanctioned the PDVSA.