Venezuelan airlines hampered by currency controls

Getting from A to B in Venezuela can be a testing experience at the best of times – at worst it can be positively harrowing. But who would have thought that this could have anything to do with macroeconomic policy?

In the third close shave for air travelers this week alone, a Boeing 737 on its way from Caracas to Aruba was forced into an emergency landing after just five minutes in the air on Wednesday afternoon when its hydraulic system was discovered to have malfunctioned.

Thankfully no one was hurt, but two other emergency landings on internal flights on Monday, also due to technical problems, have focused attention on the issue, prompting President Hugo Chávez himself to order a thorough investigation into the whys and wherefores of the matter.

As well as a general problem of oversight, there is a consensus that the fundamental cause is a widespread lack of maintenance. And shoddy maintenance is largely due to the fact that getting spare parts in this country, as any Venezuelan will tell you with a weary sigh, can be a traumatic exercise, not to mention time-consuming and costly, if
it is possible at all.

The reason is simple enough: currency controls. In a country where so many goods need to be imported – since such a large chunk of the economy is devoted to producing oil – access to foreign currency is paramount. Not least if you are an airline that needs to buy spare parts abroad in order to keep your aircraft running smoothly.

The problem is, access to dollars is severely restricted in Venezuela – in part to prevent capital flight and in part also because of an exchange rate that is seriously overvalued — which means that dollars are unusually cheap, and hence demand for them is unusually high.

Basically, like so many other sectors of the economy, Venezuela’s tight-fisted exchange control agency isn’t giving airlines enough dollars. If Chávez really wants to prevent accidents from happening in the future, an excellent start would be to make sure that they do.