Why are sold out South American airline flights leaving half empty?

If you try to book a flight out of Venezuela in the next six months, you're going to have a hard time, as all the flights are booked full. But the actual passenger count will show that almost all of them leave half empty, or less.

The Venezuelan government has set the exchange rate for the USD at 6.3 bolivars to the dollar. But then they turned around and told the average person that they can't get that exchange rate, it's only for corporate deals, and the like. The average person on the street will have to pay 42 bolivars to the dollar.

But, like so many things, there's a loophole. The 6.3 bolivar exchange rate also applies to people with a valid airline ticket, so they can exchange their money before arriving at their destination.

So people are buying the cheapest international ticket possible (around $120USD), going to the exchange, dropping the equivalent of $1000 and exchanging it for dollars. Then they leave the exchange, go to the black market currency trader, give him the dollars, and get bolivars back. The black market exchange rate is 42 bolivars to the dollar. So they're buying dollars at 6 bolivars, and selling them at 42, so even if they eat the price of the ticket with the exchange, they are still making a 700% profit.

The wonderful economics nerds at Marginal Revolution just dug up a doozy: Venezuelan flights are sold out for the next six months, but are leaving half empty. Why? They're part of a currency-trading scam that speaks volumes, and goes like this:
The government of Venezuela has set an official exchange rate for its currency, the bolivar. The rate is 6.3 bolivars to the U.S. dollar. The problem is that most people are prohibited from purchasing dollars at that rate. It's a rate used for corporate business deals, major arbitrage transactions, international finance, and so forth. The average Venezuelan does not get that rate. The result is a raging black market for dollars, which Marginal Revolution claims have become more than seven times as expensive as the official rate. You can get dollar bills on the streets of Caracas. But they'll cost you 42 bolivars each, not six.

www.psmag.com...

It's pretty smart, and I don't blame them one bit for doing it.

That is a crazy story! Love how the corporates get treated so well and yet the average citizen is shafted... sounds familiar...

reply to post by SearchLightsInc


I think it's genius. Serves the companies and the government right for screwing them like that.

So I can make $7000 taking a trip down south?

reply to post by boncho


If you can find an open flight.

Zaphod58
reply to post by boncho

 

If you can find an open flight.

Meh... back to playing the lottery...

Zaphod58
reply to post by SearchLightsInc

 

I think it's genius. Serves the companies and the government right for screwing them like that.

edit on 10/11/2013 by Zaphod58 because: (no reason given)

I don't know about genius, but why not exploit this ridiculous system. The airlines must be loving this!!

boncho
So I can make $7000 taking a trip down south?

So if I take 1000 dollars, travel to venezuela...trade it for 42000 Bolivars....then exchange those at 6.3 exchange rate I can make 6666!?

LOL, I wonder how many people are doing that exact same thing.

WOW who if you can't fly directly fly Mexico city then connect or go overland
(carefully )

Too bad I live in S.E.A and don't even have close to the funds.

Can you walk in and buy their currency at your local bank and what would the rate be or do you need a airline ticket to get 6.? to the dollar.

Easily a free vacation at least or get your teeth fixed.

sorry about the double post

reply to post by heckya


It's probably one of those things where you'd need a good Venezuelan friend. I was thinking about how would you even get the cash out of the country...if you had a friend there who had a bank account maybe that'd work, or even possibly buying something like bitcoins with the cash once you exchange it.

I imagine it'd be very hard to do without knowing someone in Venezuela.

this is pure genius . these guys are right on the money