Venezuela uses smaller banks to execute dollar deals

World - Nikhil S - Mar 21,2017

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venezuela uses smaller banks to execute dollar deals

Venezuela is utilizing less famous banks, such as a small Puerto Rican lender, since brokers for some international trade agencies, after Citigroup (C.N) in 2016, stopped offering currency services.

Presently, the Venezuelan government is using less famous banks to offer correspondent banking services, since international banks are worried about risky business with the socialist country whilst investigations into drug trafficking and corruption.

This comes alongside allegations from President Nicolas Maduros that Venezuela is fighting for financial services whilst a grave economic crisis with severe shortages and triple-digit inflation.

Government officials feel that an economic war created Venezuela's issues and label these drug charges a campaign against their authorities, by ideological opponents from the United States.

 For instance the news like, U.S. authorities' labelling Venezuelan Vice President Tareck El Aissami, a drug kingpin along with the drug-connected arrests of the first lady’s nephews, has only added to this fear.

Based on a 2016 message from Citi to PDVSA bond owners, witnessed by Reuters, this environment will not affect payment of state oil company PDVSA's high-yielding bonds that continue to be managed by Citi owing to contractual obligations.

The 14-year-old currency control procedure has toughened Venezuela’s relationship with global banks, which needs businesses to gain dollars from the government more than private banks.

Correspondent banks offer a crucial service that helps countries to manage links to the global financial system and importing goods. From 2016 the service provider has been Italbank, the Puerto Rican lender run by Venezuelan entrepreneur Carlos Dorado.

Dorado who is the owner of a fashion business that distributes high-end clothing and the Venezuelan currency exchange house Italcambio, informed that his clients are private sector banks and state-run banks, like Banco de Venezuela. He added that almost 10 or 15 percent of dollar transfers from Banco de Venezuela pass via Italbank.