Venezuela: New currency exchange system launched May 23 /update 1

Event

On Tuesday, May 23, President Nicolás Maduro launched a new version of one of Venezuela's two currency exchange systems, Dicom. The new system will allow Venezuelan bolívares to be exchanged for foreign currencies through auctions. Individuals can exchange bolívares for up to USD 500 per quarter, while legal entities can exchange for up to USD 400,000 per month. Maduro did not provide details regarding new exchange rates. The first auction will take place on Thursday, May 25. Anyone wishing to participate in the auctions must register on the website of the Central Bank of Venezuela (BCV) and the Dicom website, and hold both bolívares and US dollars in public Venezuelan bank accounts.

According to President Maduro, the revamped system is intended to address the "economic war" between Venezuela and its adversaries.

Context

Venezuela has used strict currency exchange controls since 2003 to prevent the outflow of domestic capital. The current exchange system, Dipro, is used mostly for the purchase of food and medicine and has maintained a US dollar-bolívar exchange rate of 1 to 10. Dicom is used for any individual or institution that does not qualify for Dipro and currently has a floating US dollar-bolívar exchange rate of 1 to 708.

Venezuela is facing major economic upheaval (from economic recession, triple digit inflation, currency shortages, etc.) along with an ongoing political crisis and daily, often deadly protests. The situation is worsened by major shortages of gasoline, medications, food, and other basic necessities, an alarming spike in rates of violent crime, and a resurgence of disease.

Advice

Individuals traveling to Venezuela are advised to bring with them cash in US dollars or other major international currencies (e.g., euros) for use within the country due to cash shortages and the near worthlessness of the bolívar. Due to other issues plaguing the country, it is advisable to closely monitor the sociopolitical situation, to avoid all protests due to the likelihood of violence, to remain vigilant at all times due to high crime rates, and to avoid discussing political issues in public.