CARACAS, (Reuters) – Venezuela’s all-powerful Constituent Assembly yesterday voted to legalize money exchange operations to relax the strict currency controls imposed by the social government that have throttled the oil-rich nation’s economy.
The measure’s reach was not immediately clear and previous moves to tweak the economic model have had little impact. It is unlikely, economists say, that President Nicolas Maduro’s government would do away completely with currency controls, first introduced by his predecessor, Hugo Chavez, in 2003 to curb capital flight.
The decision appears, however, to be a sign that Maduro’s government recognizes the impact of the controls on Venezuela’s economy, which is in its fifth year of recession, with inflation expected to hit 1 million percent this year.
The pro-government assembly agreed to revoke the law that criminalizes money exchange and eliminate an article from the law governing the Venezuelan Central Bank, to allow the sale and purchase of foreign currency.
The vice president for the economy, Tareck El Aissami, said Venezuelans would be able to go to state-authorized exchange houses to exchange money in a “transparent, legal and safe manner.”
“This is a big opportunity. It is a fresh start,” said El Aissami in a speech at the pro-government assembly to propose the reform. He did not provide details on how an exchange rate would be determined.
The political opposition dismissed the reform as an attempt by the government to take control of the remittances on which many Venezuelans depend, given the minimum wage is now worth just $1.50 a month, barely enough to buy a carton of eggs.
“They have said many times they will relax currency controls, which will solve all the chaos they have caused, but they have never managed to do it,” opposition lawmaker and economist Angel Alvarado said.
The Constituent Assembly was created last year to override the opposition-controlled congress, drawing condemnation from the United States, European Union and other Latin American countries.
The currency reform occurs after years of prosecution of people who operated in a parallel market for dollars used by most Venezuelans to bypass the official currency exchange platforms, which offer far lower rates.
The government currently fixes sales of dollars at an official rate of 172,800 bolivars per dollar, well below the black market rate of around 3.8 million bolivars per dollar.
Venezuela’s bolivar currency has fallen 99.99 percent against the dollar on the black market since Maduro came to power in April 2013. A $100 purchase of bolivars then would now be worth just less than a single U.S. cent.
Maduro blames the crisis on a “economic war” led by opposition leaders with the help of Washington, which last year levied several rounds of sanctions against his administration.
The government has also said it plans to remove five zeroes from the bolivar currency later this month to keep up with inflation.