Rather than the single exchange rate that we’re accustomed to when buying foreign currency, Venezuela now has a three-tier rate, in which the bolivar is worth a different amount in dollars based on the method of exchange. The primary rate, at which essentials such as medicine and food can be purchased, is just over six bolivars to the dollar. A secondary rate, known as Sicad, is defined by a weekly auction (sometimes cancelled) that values the bolivar at around eleven per dollar. The newest system, launched Monday, is known as Sicad II. Individuals and businesses can approach
authorized brokers with bids for currency, which are then passed on to the country’s central bank for approval.
The idea is that Sicad II helps to close the gap between the official rates and the one used on the black market. In the weeks leading up to the launch of Sicad II, the black-market value of the dollar plunged, as those seeking foreign currency anticipated that they would soon have a legitimate way of obtaining it at a better price. On the morning of Sicad II’s launch, a dollar bought around fifty-eight bolivars on the black market; a month earlier, it would have bought eighty-eight bolivars. (This is according to data
from DolarToday, a Web site that tracks the black-market rate on the country’s border with Colombia.) On Monday evening, the central bank announced
that the average rate of exchange through Sicad II on its first day was just under fifty-two bolivars per dollar; because the strongest official exchange rate was just over six bolivars per dollar, this represented an eighty-eight-per-cent devaluation. Still, this was the closest any official exchange rate had come to matching the black-market rate in recent years.
But it didn’t last long. In trading later in the week, though people continued to exchange using Sicad II at around fifty-two bolivars per dollar, the black-market rate jumped to more than eighty bolivars per dollar. That appears to indicate that the Sicad II market is not providing enough dollars, and that people are still willing to pay a premium on the black market in order to obtain them. Authorities have not revealed how many dollars are being sold through the new exchange, stoking worries that there is simply not enough foreign currency available to meet demand.
Meanwhile, the unrest is entering its seventh week; at least thirty-seven people have been killed in protests around the country. People are angry about the economic problems and high murder rate. Barricades, tear gas, and petrol bombs have become commonplace. On Twitter, Henrique Capriles, a two-time Presidential candidate who leads the country’s political opposition, decried
the launch of Sicad II as a “mega-devaluation,” adding
that it represented a “Black Monday” for Maduro. Silvana Lezama, a twenty-year-old communications student in Caracas, has attended and helped organize the protests since they began. She is slightly disillusioned by the lack of a clear aim, but she intends to stay on the streets. The Sicad II mechanism is “not going to solve the insecurity and the shortages,” she said.
The country’s annual inflation rate remains high, and economists are expecting further price increases as businesses swap at a devalued exchange rate and pass on any raised costs to consumers. “We are currently at a very unstable equilibrium,” Alberto Ramos, a senior Latin America analyst at Goldman Sachs, told me. In the meantime, Lezama and her friends, along with thousands of others, will stay on the streets. As long as there is profit to be made, the hawkers will continue to greet visitors at Maiquetía airport.
Photograph: Juan Barreto/AFP/Getty