For those who think that our currency is worth less, here is how distortions can make Bolívars be worth actually more. Yes, in the ultimate arbitrage (or inverse arbotrage?) opportunity, you can sell Bs. 1 million for Bs. 1.1 at the border, you hand in bills and the foreign exchange houses in Cucuta give you an instant transfer of your Bs. 1.1 into your Venezuelan bank account. This transaction called the “Cambiazo”, has been the rage at the border in the last few weeks.
The reason for this? Simple, Colombians going to Venezuela to buy goods need currency, bills, they don’t want to use their Colombian credit cards, which register operations at the official rate of exchange. As the black rate has soared, the incentive to go and buy goods in Venezuela has increased to the point that there is actually a shortage of bills at the border, creating this new arbitrage which remarkably makes the Bolívar actually stronger. Since the difference between the official rate of exchange and the black rate is a factor of ten, then goods are still cheap, even if the merchant is making a 200% profit and you pay 10% more for the Bolivars.
Another market solution by inventive Venezuelans and Colombians to a problem created by the excessive controls in Venezuela. Sort of like reverse arbitrage. Is this a first instrument of its kind in the world?