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The Fracas in Caracas
Sex, Dollar Bills, and the Venezuelan Black Market

Venezuelan prostitutes have earned the ire of President Maduro recently, who declared their trade “perverse” and set his Economy Vice President to spearhead a campaign against it. Have the morality police come to Latin America? No, prostitution is legal in Venezuela, but trading U.S. dollars isn’t. Bloomberg:

Prostitutes more than double their earnings by moonlighting as currency traders in Puerto Cabello. They are the foreign exchange counter for sailors in a country where buying and selling dollars in the streets is a crime — and prostitution isn’t. Greenbacks in the black market are worth 11 times more than the official rate as dollars become more scarce in an economy that imports 70 percent of the goods it consumes.

Venezuelans are living in a two-tiered society, in which those with access to dollars can buy goods that are unavailable to others, as Steve Hanke, professor of applied economics at Johns Hopkins University, points out. And what are these fabled luxuries? Flour, cooking oil, toilet paper, and even drinking water, all of which are now scarce in Venezuela.

The Wall Street Journal shed some light this weekend on where basic Venezuelan goods disappear to: namely, neighboring Colombia, where the locals pay less than the market price but enough to provide a profit to Venezuelan smugglers. As a Colombian living on the border notes:

“Everything you see on this street is Venezuelan,” Alejandro Valbuena, a 32-year-old merchant, said on a recent day as a steady stream of loading trucks hauled in crates of dishwashing detergent and diapers behind him. “Looking around here, you can tell why socialism doesn’t work.”

The government estimates that Venezuela loses one third of all goods to smuggling. Even if this estimate is inflated, as many allege, to cover up the failures of the Bolivarian Revolution, there is no doubt that smuggling is a serious problem. In such a perverse economy, a prostitute is at the top of the economic pyramid on account of her access to foreign customers, and needed baby formula winds up going to richer neighbors at subsidized rates. Bravo, President Maduro.

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  • Andrew Allison

    Apologies in advance, but what do you have against a prostitute on top[/grin]? Seriously, this post demonstrates the utter inability of governments to manage economies.

  • B-Sabre

    Oh God….so many jokes here, so little time…

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