Through a coincidence, I stumbled across a black market that could only exist in the Internet Age (not Silk Road). On a Reddit subreddit, I discovered Venezuelan redditors trading Amazon and Walmart gift cards for U.S. Dollars. This was very surprising given that Amazon and Walmart don’t operate in Venezuela.
Venezuela’s Unofficial Currency: Background
Through Hugo Chavez’s policies, Venezuela has maintained strict currency controls in for over 11 years. This has resulted in several official and unofficial exchange rates. Recently Bloomberg published this article on how Venezuelan prostitutes earned more money from selling dollars than they did from sex.
Right now there are four very distinct rates at which we can get dollars:
- 6.3 Bs/$: Only available nowadays to students who are doing MAs and the like outside of the country. Limit: No limit but only a few specific careers are covered (engineering mostly, never artistic of vocation careers).
- 10 Bs/$: Available for trips at a fixed rate (explained below). Limit: 3000 a year.
- 50 Bs/$: This is a somewhat new rate called SICAD II, available for everyone who has a dollars account in Venezuela. However, this is very difficult to get approved.
- 70 Bs/$: This is the black market rate. This rate does most informal exchanges.
The minimum monthly wage stands at 3270 bolivars, meaning roughly $519 at the lowest official rate (not normally accessible), or $327 at traveling rates. The official rate is difficult to obtain since you need to travel for starters, or $65.4 at Sicad II, which is only available for anyone who has an account outside of the country. And of course, there’s the black market rate, making the minimum wage a measly $47. For a whole month. Venezuelans can’t sell dollars; it is illegal. But many do on the black market, and there’s no limit to that.
Rise of The Amazon Alternative
After asking around, I discovered that every Venezuelan gets to spend (as of this year) a maximum of $300 on Internet transactions at a fixed rate (cheaper than the black market) as well as other sums in other kinds of transactions, for a total of $3000 a year.
These amounts (currently) are a fixed rate at an of 10 bolivars per dollar, which are charged to your credit card (which can be a pain to get). Last year the fixed rate was at 6.3 bolivars per dollar, and two years ago it stood at 4.3.
Here’s the breakdown of the spend allowance (at the fixed rate in US dollars):
- $3000 total dollars one can spend a year
- $2200 by swiping your credit card while on a trip (only when going on a long trip to particular places, otherwise less)
- $500 are given to you on cash (only when going on a long trip to particular places, otherwise less)
- $300 can be spent on the internet
So because of limited spending and increasing devaluation, Venezuelan redditors use their $300 internet quota to buy Amazon gift cards, since it’s straightforward to buy gift cards on Amazon. Many solicit coworkers and friends to use their Internet transaction allowance on Amazon gift cards. It is considered safer to keep Amazon gift cards or trade those gift cards for US dollars since its more likely to retain the same value.
The Problem Doesn’t End There
The real problem is that there are people needing more dollars than the government is willing to supply and the SICAD II exchange rate won’t cover that demand. This forces people to the black market, which creates an arbitrage opportunity as people sell SICAD II dollars to 70 Bs per dollar (after they bought them at 50 Bs per dollar, thus making quite the profit by doing nothing and breaking the system). Many Venezuelans are optimistic but are cautious about their country’s future.