Venezuelan Exchange Control Restrictions from 6 February 2003 The Government of Venezuela announced on 6 Feb. 2003 that foreign exchange transactions would be controlled with immediate effect. Importers and businessmen have to apply to their banks for foreign exchange. The banks will forward the applications to the Central Bank. In the Central Bank, there is a Foreign Exchange Management Committee, called CADIVI, which would decide whether and how much foreign exchange could be allowed. The process of this approval might take up to 45 days. Only after the approval can the importer place the definite order. The approval will have a validity of 120 days. The foreign exchange rate was fixed at Bs. 1.920=1US$. (with effect from 9th February 2004). Subsequent devaluation of the Bolivar has placed the official rate at Bs. 2150 per US $ effective since March 2005. In February, the Government also announced that with effect from lst March 2004, credit card holders will be entitled to spend up to US$ 2,000/- equivalent on travel abroad or expenses incurred during foreign travel in a single year. This ceiling has been increased to US$ 4000 w.e.f. 1 July 2004. Credit card holders are also permitted to make internet purchases up to a limit of US$ 2500/- and most recently, travelers that do not have credit cards can request US $ 400 in cash. It may be noted that the exchange rate was 1US$ = Bs. 790 in Feb. 2002 when the government abandoned its earlier exchange rate system and adopted the floating exchange rate. Since then, the currency was depreciating steadily and reached Bs. 1400 for a dollar in Dec. 2002. After the general strike, the exchange rate was Bs. 1800 = 1US$ in the second week of January 2003. The main reason for this exchange control was the shortage of foreign exchange faced by the government caused by the general strike in the petroleum sector, because of which there was no inflow of petro-dollars in December 2002 and January-February 2003. The oil earnings account for 85% of total exports and 50% of government revenue. The government wanted to conserve the available foreign exchange and use it for priority purposes and prevent speculation and capital flight. The imposition of the exchange control coming on top of the difficult economic situation has a negative impact on imports. The total imports of Venezuela , which were around $17 billion in 2001, came down to about $13 billion in 2002. In 2003, the imports amounted to US$ 11 billion. Similar Exchange Controls were imposed by the previous Venezuelan Governments in 1983, 1989 and 1994-97.
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