Venezuelan bolivars aren't convertible outside the country

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CARACAS, Venezuela – Venezuelans are finding out that their money is no good with one airline and others may also cut off the country from flights abroad.

Air Europa, a Spanish discount airline, has suspended sales of tickets in bolivars, the Venezuelan currency, because Venezuela has not been exchanging the bolivars for U.S. dollars as is customary.

The suspension, which Europa said Friday is "indefinite," caught some Venezuelans by surprise.

Javier Martinez tried to book a flight this week to Madrid on Air Europa in Caracas, but even though there were plenty of seats available Air Europa refused to accept his Venezuelan bolivars.

''The reservation people told me that I could buy the ticket in dollars or euros, but not bolivars,'' says Martinez. "I'm Venezuelan and what other money do I have?"

Under Venezuela's foreign exchange controls, access to dollars is tightly restricted. International airlines serving the country are currently owed up to $2.6 billion in dollars for bolivars that they have turned in to Venezuela's Cadivi foreign exchange agency.

Air Europa is owed upwards of $160 million, it said. A company director is flying to Caracas on Monday to meet with the country's foreign exchange agency to discuss the problem, the airline said Friday. The company operates its Madrid-Caracas-Madrid route six times a week.

Most other international airlines are taking other steps to limit their exposure to Venezuelan bolivars, which aren't convertible outside the country.

"Many airlines are reducing the amount of seats they're offering to local flyers,'' said says Mildred Amaro, who runs Barquero Tours in the central industrial city of La Victoria. "On many routes, it's difficult to find a seat. Inventory is limited."

American Airlines, which has nearly 50 weekly flights to Venezuela, continues to sell tickets in local currency, spokeswoman Martha Pantin said. However, the airline's website says that most flights are fully booked for the foreseeable future.

Local newspapers reported earlier that Venezuela had offered to settle its debt with international carriers by giving them free jet fuel in lieu of dollars. But carriers have refused, noting that the offer is far less than owed.

Filling up a Boeing 767 would amount to about $8,000 in fuel compared to the millions carriers are owed.

The official exchange rate of bolivars for dollars is considered off-base because the rate set by Caracas overvalues the bolivar's worth. The official rate is one U.S. dollar for 6.3 bolivars. But unofficial exchanges on the black market will trade dollars for bolivars at a rate 11 times higher.

Venezuelan President Nicolas Maduro refuses to officially devalue its currency to align it with the market value. Meanwhile, vendors increasingly demand more bolivars for their products.

Any devaluation would reduce the amount of dollars owed to the airlines and to any firm that holds bolivars. Many airlines saw significant losses in their Venezuelan operations when the government devalued the bolivar in February 2013 after saying it wouldn't.

The reduction in flight availability coincides with an upswing in passenger traffic as Venezuelans try to take advantage of a loophole in the foreign exchange regulations that allow them to buy dollars abroad with their bolivars.

The dollars are credited to travelers' credit cards and when abroad, the travelers withdraw the money via a cash advance. With the cash U.S. dollars in hand, travelers return to Venezuela where they sell the dollars on the black market for more than 65 bolivars to the dollar, a much higher rate they what they paid for the dollars before they left.

So, a Venezuelan who gets $3,000 for his 18,900 bolivars can sell the U.S. currency for 95,000 bolivars, a more than ten-fold return on investment in a country where the monthly minimum wage is about 3,300 bolivars.

Martinez hopes that Air Europa will change its policy.

"I still plan to go to Madrid in May but it's difficult to find a seat at a fair price,'' he says. "It's embarrassing that no one wants to accept the bolivar."

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