By Carlos Seijas Meneses |
Caracas (EFE) At the same time, the handling of foreign currency for transactions was reduced by 21%, as a result of the Executive’s efforts to contain the dollarization process, according to experts.
According to studies carried out by the firm Ecoanalítica in 10 of the main cities of the country, currencies went from representing almost 66% of transactions, at the end of 2021, to 45%, while the bolivar increased its presence in the business operations from 34% to 55% since then.
The economist and university professor Jesús Palacios explained to EFE that there are even sectors, such as household appliances, electronics or spare parts, that “were very dollarized”, and now they are once again “seeing payments in bolivars in a very important way or with a very significant weight”. .
In addition, he pointed out that there are companies that, at the beginning of 2022, “charged 70% in dollars, and now 80% in bolivars.”
New currency tax, the main cause
The main factor that has caused the reduction in the use of foreign currency has been the application, since March of last year, of a 3% tax on payments in foreign currencies, which consumers avoid by paying in bolivars.
A manager of a supermarket in Caracas, whose name preferred to remain anonymous, told EFE that “people prefer to pay in bolivars to avoid paying the tax,” which, in the end, “increases a little” the price of the product.
The commerce sector asks the Executive to “seriously study repealing” this tax, called Tax on Large Financial Transactions” (IGTF), which -explains- has an impact on each of the links in the production chain until the product reaches the consumer, whose price, therefore, increases “between 12 and 14%”.
The merchant, who stated that “people do not want to buy in foreign currency but in bolivars,” assured that, in her store, 75% of payments are in local currency and the remaining 25% in foreign currency, when a year ago it was ” 50-50”.
In this sense, the pollster Datanálisis told EFE that, according to its calculations, 70% of the payments made in the country are in bolivars and the rest in other currencies, when a year ago it was the opposite.
contain dollarization
Palacios assured that the Executive took “additional measures that also led to” the use of foreign currency being reduced, including the “suspension of bank transfers in dollars” and, subsequently, the increase in the withdrawal commission to 3.80 %, “quite expensive”, when before “it was below 1%”.
According to the economist, the Executive implemented these measures to “not lose the ability to make monetary policy”, in which the Central Bank of Venezuela (BCV) acts as “financier”.
“If the government allowed dollarization to advance infinitely, it would lose that power to use the bolivar as a lifeline, as a lender of last resort (…), and avoid that by giving the bolivar more space,” he explained.
The intention of the Executive, he pointed out, is that “limited dollarization be maintained”, but not to end it, since it allowed there to be “dynamism of economic activity and, above all, commercial activity, which is the one that has had the main upturn”.
“Limited means, probably, below 50 or 40% (of transactions), and, above all, not allowing much progress in the financial system, not granting loans in dollars and suspending transfers in foreign currency,” he specified.
The dollar, still preferred over the bolivar
Despite the increased use of the bolivar, the dollar continues to be used to set prices for goods and services and for savings, as the local currency has continued to lose value in the past year.
Between March 10, 2022 and March 10, 2023, the bolivar devalued 82% against the dollar, whose price, in that period, rose 457%, going from 4.33 bolivars to 24.14, according to BCV.
So far in March, the local currency has reached a stability that, for Palacios, is “cyclical”, since during this month -he explained- the declaration and payment of Income Tax (ISLR) are made, “forced to be made in bolivars”, whose demand, therefore, increases.
However, this stability is “difficult” to maintain, and he expects the exchange rate to close the year at around 50 bolivars per dollar, he added.