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BLOOMBERG/ C.DEVEREAUX"Exchange houses in Colombian border towns like Cucuta have become the only “liquid market” in trading of bolivars for dollars after President Hugo Chavez banned currency trading last May and required banks to use a state-run market, said Ricardo Hausmann, director of the Center for International Development at Harvard University.
“It’s a desperate situation for businesses, especially in Venezuela where everything is imported,” said Juan Pablo Fuentes, Latin American economist at Moody’s Analytics in Philadelphia. “These currency controls are like a game. The government looks to fence you in and you are always looking to find the exit.”
Cucuta is 375 miles from Colombia’s capital and trades about $5 million of bolivars a day.
“I don’t know of any country in the world that has a more inefficient and absurd exchange rate regime,” said former Venezuelan planning minister Hausmann. The nation's currency control system “generates uncontrolled inflation, fiscal swings and periodic massive devaluations,” he said.
