Tag: Geography

I first looked at a map of Venezuela around 15 years ago when you could fly there from Russia for a couple hundred dollars. I studied the map but never used it (though perhaps I should have).

At that time, it was the era of wild currency arbitrage, where the difference between the official bolivar rate “from the TV” and the real price on the black market reached astronomical proportions.

The scheme was simply brilliant: within the country, all airlines were required to sell tickets for local currency at the government rate. If an international flight cost a thousand dollars, it was converted into bolivars at the “pretty” official rate. But if you came off the street with a stack of real dollars and exchanged them at a money changer, the sum in bolivars needed to purchase the same ticket cost just a real hundred dollars, and sometimes even fifty.

The real fun began when intermediaries or acquaintances within the country got involved. You could book a ticket online through a local office, pay for it in bolivars through someone in Caracas, and then simply give them cash dollars when meeting, or transfer to a foreign account. The savings were so absurd that people flew business class simply because it was cheaper than lunch at Miami airport.

But cheap tickets were just the tip of the iceberg, because there was also something known as “raspao”. The state gave every traveler the right to buy a couple of thousand dollars at the cheap official rate on a credit card for spending abroad. Eventually, people bought cheap tickets, flew to the nearest islands, cashed in their currency quota, and returned home virtually rich, having sold these dollars on the black market for many times more.

Of course, this bonanza could not last forever and very quickly ended with a loud crash. Airlines quickly realized that their accounts were filled with millions of worthless-bolivars, which the government flatly refused to exchange for real currency. Planes flew half-empty, although all seats were officially bought out for currency quotas, and the government’s debts to carriers grew to billions of dollars, after which global giants simply began to massively leave the market.

But it worked for a while. I don’t remember exactly, somewhere between 2011 and 2014.

How such a breakdown between the official and unofficial rates lasted so long is beyond comprehension. The government could not quickly abolish the official rate because it supported imports of food and medicine. As soon as they acknowledged the real dollar rate, prices in stores would have skyrocketed immediately (which later happened). Flight tickets merely became a “collateral hole” in the system that everyone used while it was possible.