VENEZUELA'S BLACK MARKET EXCHANGE RATE FOR DOLLAR COULD CAUSE THE COUNTRY'S ECONOMY TO IMPLODE

Sometime today, the so-called parallel (black market) exchange rate will hit 75 Bolivars to one US Dollar.  The need for dollars, from importers and business travelers who are unable to obtain them timely from legitimate channels, to individuals who have lost all faith in the Venezuelan currency, has become a financial supply-and-demand nightmare for many Venezuelans.

This morning quote stands at 74.33, which is more than ten times the official rate, and there are fears that there is no end in sight to further increases, as the demands of the market drive the price ever higher. The impact for Country Risk purposes is serious:

(1) Businesses cannot get dollars to pay their debts to foreign creditors. No imports mean no consumer goods on the store shelves.
(2) Loans, made in US Dollars, may not be repaid to foreign banks. Defaults could occur as a result.
(3) Repatriation of profits out of the country is delayed indefinitely. Many international airlines have been unable to send millions of dollars back to their home offices, and some carriers have stopped writing tickets in Venezuela altogether.
(4) The demand for greenbacks could spawn an explosion of counterfeit one hundred dollar bills, as desperate buyers seek out any available source for currency, and get burned.
(5) A total disruption of the consumer retail economy could eventually occur, and a complete loss of access to food and other staples may cause civil disorder, riots and a loss of law and order.

We shall continue to follow developments in Venezuela. to update our readers on risk.