The wonderful economics nerds at Marginal Revolution just dug up a doozy: Venezuelan flights are sold out for the next six months, but are leaving half empty. Why? They’re part of a currency-trading scam that speaks volumes, and goes like this:
The government of Venezuela has set an official exchange rate for its currency, the bolivar. The rate is 6.3 bolivars to the U.S. dollar. The problem is that most people are prohibited from purchasing dollars at that rate. It’s a rate used for corporate business deals, major arbitrage transactions, international finance, and so forth. The average Venezuelan does not get that rate. The result is a raging black market for dollars, which Marginal Revolution claims have become more than seven times as expensive as the official rate. You can get dollar bills on the streets of Caracas. But they’ll cost you 42 bolivars each, not six.
The government of Venezuela has set an official exchange rate for its currency. The rate is 6.3 bolivars to the U.S. dollar. The problem is that most people are prohibited from purchasing dollars at that rate.
Except there’s a loophole. The loophole is for people with “a valid airline ticket.” Which makes sense: you’re flying to Miami (or, for that matter, Rio) and you need hard currency. So you get the official 6.3-to-a-buck rate, lucky traveler.
Being not at all stupid, Venezuelans appear to have jumped on the loophole to simply buy the cheapest international air ticket they can find—Caracas to Port of Spain, Trinidad, is $120 off-season—then take the ticket to the currency exchange and wave it at the teller. Throw down $1,000 in bolivars, walk away with the valuable U.S. notes.
Then you cross the street to the black market currency trader, give him the $1,000, and get back 42 bolivars to the dollar. To be clear, that’s local notes bought at six bolivars to the dollar, then dollars sold for 42 bolivars.
Among other things, if you then want to actually use the ticket and go on vacation to Trinidad, the flight has more than paid for itself. But more likely, you just sell off the ticket or eat it, and still walk away with a 700 percent profit.
A commenter on the original story about the clever end-run of Venezuela’s post-Chavez economic policy notes that a similar scheme was popular in the Soviet-era Eastern Bloc. Then, the idea was for someone who could get a visa to fly beyond the Iron Curtain to buy two tickets from, for example, Moscow to London. Even if just one person was flying. You’d buy the tickets using inexpensive Soviet rubles. In London, you’d ask for a refund on the second ticket. (“Unfortunately, my husband took ill and couldn’t make it, and the office in Moscow had already closed.”) The refund would come in Sterling, which you’d carry back to Moscow and trade in for rubles at an exaggerated, black market rate, paying for the first ticket with the profit.