How can this huge capital flight be explained amidst exchange control?
The government and state-run oil holding Petroleos de Venezuela, in their need for funding, issue US dollar-denominated bonds. These notes are bought by individuals and corporations in Venezuelan bolivars and then sold abroad to get foreign exchange. “The non-financial private sector recorded in the second quarter a hike of its foreign deposits, mostly because of the funds in foreign currency following the settlement of notes in foreign currency place in the secondary market by the National Treasury, PDVSA and private financial institutions,” stated a report prepared by the BCV. This is not news. “Over the last two years, outgoing foreign capital was higher than USD 40 billion. In a country where the private sector barely exports USD 4 billion, understandably, this amount has been provided by the public sector. How? Through the issue of foreign public debt, sale of Argentine bonds, structured notes and otherwise,” found a report released the first week of August by think-tank Econanalt
