Travel restrictions crimp shopping sprees

CARACAS, Venezuela — Venezuelans accustomed to leisurely shopping sprees abroad now face a new annoyance: President Hugo Chavez wants to know exactly where they are going, what they are buying and how long they’ll be gone.

Citizens must now tell the government where they are traveling and save their receipts to provide proof of how they spent the money. Violators may see their credit cards turned off.

The government agency Cadivi has set new limits on how much hard currency each person is allowed to buy based on their destination and length of trip, giving greater allowances to travelers to the Middle East, Europe, Africa and Asia. Vacationers heading to neighboring Colombia, which Chavez has branded a puppet of the United States, can only qualify for a maximum of $700 in currency transactions a year, the least amount of any country.

The new restrictions come just a year after Chavez slashed each citizens’ travel allowance in half.

Economists say the rules are an attempt to preserve the country’s international reserves and avoid devaluing Venezuela’s currency, the bolivar. Devaluation could cause inflation to spiral out of control at a time when it's already the highest in the hemisphere.

The new regulations have the travel industry bracing for a collapse in demand, said Maria Eugenia Troconis, manager of the Saeca Carlson Wagonlit Travel agency in Caracas. Demand for plane tickets and tourism packages in the U.S. and Europe was already off about 30 percent this year, and she expects another drop of about 40 percent in 2010.

Before Chavez started cutting dollars for international travel at the beginning of 2009, Venezuelans had grown accustomed to cheap trips abroad, benefiting from the overvalued exchange rate, which has stood at 2.15 bolivars per dollar since 2005.

The president originally implemented foreign exchange controls in 2003 to prevent capital flight during a politically volatile period. Immediately a black market for dollars developed, where Venezuelans today have to pay about 5.95 bolivars per dollar.

"This is going to affect the entire industry," said Troconis, the travel agent. The government is "putting up barriers for us."

Mirta Uzgategui, 59, owns a clothing store on Margarita Island, a shopping haven about 200 miles across the Caribbean from Caracas.

The bleach-blonde fashionista, wearing tight black jeans and a sweater before boarding a flight to Houston on her way to Los Angeles, said she travels several times a year to buy clothes for her shop. She complained that the $2,500 maximum set for travel to the U.S. doesn’t even cover one trip.

For travelers who can’t get permission to buy currency at the pegged exchange rate, the only other option is to go to a parallel, unofficial market. It’s a notoriously opaque system where people rely on blogs and Twitter accounts to find out the current exchange rate.

"What they are trying to do is keep us here," said Ivan Lenin, a 32-year-old electronic engineer, before boarding a flight this month from Caracas to Sao Paulo for a business meeting. "All the bureaucracy is getting too cumbersome."

Many in Venezuela’s middle class see the rules as another tool to increase control for a power-hungry government. The restrictions allow Chavez, who has become notorious for attacking the private sector through government nationalizations and property seizures, to more efficiently use access to dollars as a political tool.

The president says that only food and medicine importers will be given priority in receiving dollars at the official exchange rate, forcing individuals to buy dollars on the unregulated, parallel market, and driving up the cost for imported goods and international travel by 180 percent.

The increased difficulty in obtaining currency hurts Venezuela's small business owners, who don’t have the time or the government connections to navigate through the bureaucracy required to buy currency.

"I travel for my business, but I’ve already had to buy dollars in the parallel market, because official dollars practically don’t exist," said Uzgategui, the clothing storeowner.

The reduction in the travel allowance to Colombia, the U.S.’s staunchest ally in Latin America, is the most drastic. Venezuela is Colombia’s second-biggest trading partner, and commerce between the two countries has already suffered since topping out at $7 billion in 2008. Chavez announced plans in July to "freeze" ties with the neighboring country.

Chavez, who regularly praises former Cuban President Fidel Castro and openly campaigns to implement socialism in his OPEC-member country, may be imposing the new restrictions out of necessity, not just for political reasons, said Jose Manuel Puente, a professor of public policy and political economy at the Instituto de Estudios Superiores de Administracion, a Caracas business school.

Exports have fallen by half in the first nine months of the year, according to figures published by the central bank, whacked by a combination of lower prices, declining oil fields and OPEC-mandated production cuts.

"The government doesn’t have enough petro-dollars for the high demand that exists," Puente said. "What they’re creating is a system of rationing of dollars."