Here at Caracas Chronicles we’ve grown accustomed to the premature, uninformed tweets declaring the “End of the exchange controls!” every time the government issues a new decree that “opens our financial frontiers to flows of foreign currency.”

Remember in August 2018, when the Law of Exchange Crimes was repealed and nothing changed? Or later that August, when the government published a long decree explaining how the new Exchange Market System would operate, and then the market never actually opened?

Each time, figurative champagne bottles were popped all over Venezuelan Twitter for the Irish wake of exchange controls, although these remained firmly in place afterwards. The exchange controls are still far from over after the latest Central Bank (BCV) resolution, even if they’re now less strict.

The May 2nd resolution opened two ways to exchange bolivars for foreign currency: one for small “retail” transactions in cash, and another for larger transactions via bank transfers.

The exchange controls are still far from over after the latest Central Bank (BCV) resolution, even if they’re now less strict.

The retail market is, according to the BCV, operating at 12 banks and three currency exchanges. While the resolution—and a circular sent by the BCV to banks—states that there are no limits for transactions, that’s actually a lie; at the moment, people can only buy/sell a minimum of €50, and a maximum of €500 a day, €4,000 a month, and €8,500 a year, or its equivalent in other currencies. Cash only.

As in any market, there’s only something to buy if there’s someone selling it—we’ve heard banks are selling only small amounts of foreign currency, since very few people are selling theirs (and banks are not rushing to sell their own stashes of foreign currency). The BCV circular states that banks must resell 80% of the currency they buy from clients, and they can keep 20% to trade with other banks.

Operations are limited to just a few branch offices in each bank. At Banco Provincial, which boasts over 300 branch offices nationwide, you can buy/sell currency at only 11 of those. For Banco Exterior, you have your choice of two branches—both in Caracas—and in BanCaribe, one. In any of these offices (they only take orders for three hours a day) you’ll have the privilege of filling three forms. If your order is to buy foreign currency, they’ll let you know the next business day whether you got lucky.

The second market, called “Mesas de cambio”—sort of “foreign exchange desks”—are for larger transactions, in which banks match bids and sell orders from their clients. For example, at BanCaribe, it’s only for transactions of $15,000, or more. According to the BCV, six banks are operating these markets, but it’s unclear what volume they’re trading. Judging by the scant BCV reports, it’s not much: on May 19th, only two of the six reported both buying and selling foreign currency, and three banks didn’t buy a dime.

Then there’s the issue of how to send any of these funds abroad, since U.S. sanctions have made it difficult for local banks to transfer funds out of Venezuela. Correspondent banks —usually large banks that handle wire transfers for smaller banks—have been frequently refusing transfers to/from Venezuelan entities, for fear of running afoul of U.S. sanctions or facilitating money laundering. So even if the government lifts all exchange controls, locals might not be able to transfer abroad because foreign banks don’t want to touch money linked to Venezuela.

Banks with “Mesas de cambio” are apparently dealing with these barriers by bypassing wire transfers altogether. BanCaribe, which owns an offshore bank in Curaçao, limits their FX market to clients with accounts in both the Venezuelan and the offshore bank: when a client buys dollars at the Venezuelan bank, they’ll deposit the funds at the dollar-denominated account in Curaçao. That way, they’re not actually making an international wire transfer, just moving money from their right vault to the left vault. They make no promises on whether you’ll be able to transfer the funds from Curaçao to another country, warning that transfers “are subject to conditions and approval of the correspondent bank.”

According to the BCV, six banks are operating these markets, but it’s unclear what volume they’re trading.

Other banks, like Banco Venezolano de Crédito and Banco Occidental de Descuento, also have offshore branches in Curaçao, and their FX markets are limited to clients with accounts in both banks, just like BanCaribe.

The state-owned Banco de Venezuela —a target of U.S. sanctions— seems to be dealing with the problem by not actually dealing with it: when you buy euros from them, they deposit the funds in your euro-denominated account at… Banco de Venezuela. Not even in an offshore bank. You can’t transfer those euros abroad, it’s just to other local euro-denominated accounts inside Venezuela.

All these operations, while still quite limited and cumbersome, were forbidden just months ago. In that sense, the government did lower the barrier to foreign currency flows, but you still can’t use a Venezuelan credit card abroad, or make wire transfers to other countries, and there are few, if any, incentives for individuals to sell their dollars at local banks. The rate is the same as the black market, and it might be easier and faster to buy and sell dollars from your trusted uncle, or friend-of-a-friend.

Note also that if you want to buy/sell under $15,000 via transfer (and not cash) there’s no place for you in either of these two new arenas. You’re still better off using Zelle or PayPal. The high-value transfer market will nonetheless come in handy for companies that want to make their currency transactions legally.

These changes in the exchange controls regime fit a recent pattern by the government in terms of economic policy: make long-overdue changes at a time when their effect will be negligible (because the all-encompassing crisis requires major reforms). It’s the equivalent of cleaning an infected wound once the patient is already dying from sepsis.

Too little, too late.