Sex sells but black market forex earns greater profits

The arrival of a Liberian-flagged freighter with Ukrainian, Arab and Filipino sailors spells one thing for Elena -- dollars. And greenbacks are king in Venezuela, the 32-year-old prostitute says.

Within hours of hearing of the ship’s imminent arrival, she has packed her bags and is heading to the crumbling city of Puerto Cabello. It is a 450-kilometer (280-mile) journey from her home in the Western state of Zulia that Elena finds herself doing more often now as Venezuela’s economy contracts, the bolivar slumps and prices soar.

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 (NYBOT:DXM14) 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% of the goods it consumes.

“The dollar is king these days, but having them comes at a price,” Elena, who uses an alias to protect her identity, said late last month in a room she rents in a Puerto Cabello brothel. “Yes, we got dollars to afford the things our families need, but we have to sell our bodies for it.”

The benefits of the trade are stacked around Elena’s room in the Blue House brothel -- bags of rice (CBOT:ZRN14), flour, sugar (NYBOT:SBN14) and cooking oil -- products that other Venezuelans have to line up for hours to buy at regulated prices in shops, if they can find them at all.

Black Market

The bolivar has fallen to 71 to the dollar from 23 on the black market since President Nicolas Maduro succeeded his mentor Hugo Chavez in April 2013. The government tightened currency handouts to stem the outflow of foreign reserves, which are near a decade low. The official exchange rate, reserved for imports of food and medicine, is 6.3 bolivars per dollar.

The dollar shortage is turning Venezuela into a two-tier society similar to the Soviet Union and Cuba, said Steve Hanke, professor of applied economics at Johns Hopkins University in Baltimore. Those with access to dollars such as prostitutes, tour agents, airport taxi drivers and expatriates are able to shield themselves from inflation by trading their greenbacks at ever higher rates. Those who can’t are seeing their living standards decline.

In a country where prostitution is legal, it is the black market in dollars that Maduro has called “perverse,” saying it was designed by the bourgeoisie to destroy his Socialist government.

Boom Industry

Officials have tried jailing traders, shutting down brokerages and setting up four parallel exchange systems to stem the rise of the unofficial rate in the 11 years since Chavez began controlling the bolivar’s price.

Prostitution has become the only boom industry in Venezuela’s biggest port. The Blue House brothel is clean and well-kept, with a patio and kitchen where women get three meals a day. Outside, the squares and cobbled streets of the colonial center stand in ruins, with the smell of sewage pervading the piles of garbage.

“Before I was working to support my kid and my mom; now I support my entire family,” said Paola, a prostitute who like Elena comes from Zulia and declines to give her real name. “Dollars are the only way to get by. The bolivar wages of my uncles and cousins barely mean anything now.”

Prostitutes in Puerto Cabello charge sailors a fixed rate of $60 per hour. They also help foreigners arrange rooms, telephone cards and taxis, charging them in dollars and then paying the landlords and drivers in bolivars.

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