Foreign credit card transactions add scarce dollars to Venezuelan circulation – 06/13/2024 at 1:00 p.m.

Foreign credit card transactions add scarce dollars to Venezuelan circulation – 06/13/2024 at 1:00 p.m.
Foreign credit card transactions add scarce dollars to Venezuelan circulation – 06/13/2024 at 1:00 p.m.

((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto)) by Mayela Armas

Transactions paid with foreign credit cards are helping to circulate more currency in Venezuela, where the government has set a key rate as part of its efforts to control double-digit inflation, four public sector sources said and finances.

Transactions have been rising steadily since the government of President Nicolas Maduro, who is running for re-election in July, eased currency controls five years ago, allowing greater use of U.S. dollars alongside the local currency, the bolivar.

When Venezuelans with foreign bank accounts use foreign cards, their bank outside Venezuela sends the funds to its local intermediary bank in dollars.

The local bank can then sell the dollars, which increases the limited supply of foreign currency and helps the government maintain the policy rate at 36.4 bolivars to the dollar and control inflation, which was 59.2%. during the 12 month period ending in May.

Mr Maduro’s government is seeking to increase its tax collections to have funds to spend on public workers, sources told Reuters, as it seeks to win their support at the polls.

“These foreign currencies help support the foreign exchange market,” said a public sector source who asked not to be named.

About 11% of transactions at supermarkets, pharmacies and other businesses are made with international cards, up from 8% last year, local analyst Ecoanalitica said in March.

According to financial industry estimates, local banks sell about $60 million a month from transactions with foreign credit and debit cards.

The buyers are often retail or industrial companies that need foreign currency to pay for their imports.

Other dollars come from the central bank and export earnings from Chevron CVX.N , which operates in the country under a special license from Washington. These two sources each bring in around $200 million per month, according to calculations by local analyst firm Sintesis Financiera.

Although the dollars flowing through foreign card transactions are smaller than those coming from other sources, banking sources said the funds were helping to ease pressure on the market.

The central bank did not respond to a request for comment, nor did the finance ministry.

In 2023, foreign exchange from international cards will reach $900 million, according to banking sources.

U.S. sanctions have halted some international transfers, with the central bank and some local banks no longer having partner banks allowing them to move money in and out of Venezuela. Other banks still have partners abroad.

American sanctions mainly target members of Mr. Maduro’s government and the oil industry and do not prevent private Venezuelan companies from operating abroad.

Foreign cards “offer a little oxygen because a lot of people can’t access bolivars,” said economist Jesus Palacios, referring to credit restrictions on bolivar-denominated credit cards.

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