#858: Venezuela's Fugitive Money Traders The Venezuelan government doesn't want you to know the real value of its currency. But Ruben and Mila figured it out. Now they're on the lam.
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#858: Venezuela's Fugitive Money Traders

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#858: Venezuela's Fugitive Money Traders

#858: Venezuela's Fugitive Money Traders

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SARAH GONZALEZ, HOST:

Venezuela used to be the richest country in Latin America - oil money, lots of oil money.

ALISSA ESCARCE, HOST:

Venezuelans, like Mila (ph), remember the capital city bustling with business.

MILA: Oh, Caracas - Caracas used to be a city full of cars and people and chaos but good chaos.

ESCARCE: Good chaos?

MILA: Yes (laughter).

ESCARCE: But when oil prices tanked a couple years ago - bad chaos. Venezuela ran out of money, so it started printing more money to pay its bills.

GONZALEZ: And printing all this money made the value of the money plummet. Venezuela's currency is called the bolivar - or the bolivar? I don't know how you say that in English.

ESCARCE: Bolivar.

GONZALEZ: OK, so every day now you need more and more bolivares to buy the simplest things, like chocolate.

MILA: If you want a good chocolate like - I don't know - a Milky Way or something like that, you can buy it in Venezuela, but you need a backpack of bills.

GONZALEZ: You need millions of bolivares. Some economists call this the wheelbarrow problem, where you literally have to haul your money around in garbage bags or suitcases or wheelbarrows to buy the tiniest thing.

ESCARCE: The term comes from Germany in the 1920s when Germany's money was losing value like crazy.

GONZALEZ: So when you go to the store with your backpack filled with money, how does the person at the store count all of this money?

MILA: They have to know the weight of the bills.

GONZALEZ: They need to weigh the bills?

MILA: Yes.

ESCARCE: The smaller bills, they're not even worth the paper they're printed on anymore. They line the streets, and nobody bothers to pick them up. People are shredding up money to use as confetti, making belts and bracelets out of money, weaving money baskets.

GONZALEZ: If you have 12 bolivares today, it's worth six in a couple weeks, then three, then basically nothing. Think of Venezuela's money as an unwrapped chocolate bar. The minute it touches your hand, it's melting, disappearing. So Venezuelans are trying to get rid of their money right away, trade it in for anything at all - toilet paper, chicken.

MILA: OK, I have sugar. Who needs sugar?

GONZALEZ: Sugar holds its value better than the melting bolivar, so Mila says you spend your whole paycheck on sacks of sugar. And those sacks of sugar are now your savings account. Those are the things you can hopefully sell or trade later to pay your rent or a cab fare.

MILA: Maybe you can trade some sugar for milk or some coffee for toilet paper or anything that you need.

GONZALEZ: And then Mila gets a call from this young guy in Mexico City. And he's like, Venezuelans don't have to invest their money in bags of sugar. That's crazy. I'm running this whole online operation that can connect Venezuelans to U.S. dollars.

(SOUNDBITE OF BRIAN FLORES, JOHN HUNTER JR. JONATHAN SLOTT AND JONATHAN STILL'S "BEATING ALL ODDS")

ESCARCE: Mila starts working with him. And helping Venezuelans store their money in U.S. dollars turns out to be a really dangerous thing to do.

GONZALEZ: Hello, and welcome to PLANET MONEY. I'm Sarah Gonzales.

ESCARCE: And I'm Alissa Escarce. Today on the show, the Venezuelan government has arrested hundreds of people for trading currency. We try to find out why. And we talked to some people who narrowly escaped.

GONZALEZ: Mila? Mila's on the run.

(SOUNDBITE OF BRIAN FLORES, JOHN HUNTER JR., JONATHAN SLOTT AND JONATHAN STILL'S "BEATING ALL ODDS")

ESCARCE: People trade their currency for dollars all over the world, but a lot of countries make this hard to do, so this guy in Mexico made a website to help people get around these restrictions. His name is Ruben Galindo.

GONZALEZ: Ruben, you're pretty young, right?

RUBEN GALINDO: Yeah, I'm pretty young, I guess.

GONZALEZ: How old are you?

GALINDO: I'm 13.

GONZALEZ: (Laughter).

GALINDO: I'm 27.

GONZALEZ: You're 27.

Ruben calls himself a libertarian and a freedom fighter.

GALINDO: I think of myself as a freedom fighter because we think that the biggest issue with money is that it's trapped, so everything we do all day is try to free people's money.

ESCARCE: Ruben's website is called AirTM. It connects you to people anywhere in the world who are willing to trade currencies. So, like, if you're an American going to Europe and you need some euros, you can buy them from a guy who wants your dollars.

GONZALEZ: And Ruben is like, I know who would love to trade their currency for dollars - Venezuelans. Why should they be stuck with money that is melting away in their back pockets?

GALINDO: Why should you be tied to any specific type of money if it's not working for you?

ESCARCE: So he posts an ad on Facebook.

GALINDO: It said something really simple. It said (speaking Spanish) buy dollars with bolivares.

ESCARCE: And AirTM takes off. Thousands of people start trading their bolivares for dollars every day.

GONZALEZ: But you can't pay for anything in Venezuela with U.S. dollars, so you just save in dollars, and then you swap it right back out for bolivares when you need to buy something.

ESCARCE: Pretty soon, Ruben had 25 employees working all over Venezuela. Mila, the one with the backpacks full of cash, she was the first AirTM employee in Venezuela.

GONZALEZ: And at some point, the Venezuelan government starts to take notice because they do not want Venezuelans to have easy access to dollars.

GALINDO: They don't like their people to easily trade their local currency for foreign currency.

GONZALEZ: And that's because money is really only as good as your faith in it. If you don't believe it has value, it won't have value. And if all of a sudden your whole country starts dumping their bolivares for dollars, the bolivar will collapse.

ESCARCE: And you can see this happening. If you go on AirTM, people are trading for dollars every second.

GONZALEZ: And all those transactions, they reveal a really important number - the exchange rate, how many bolivares people are willing to pay for one U.S. dollar.

ESCARCE: The Venezuelan government takes this number very seriously because it's a signal to the world of how strong or weak your economy is.

GALINDO: The exchange rate is basically their blood. They don't want their blood to be diluted or be worthless.

GONZALEZ: The Venezuelan president, Nicolas Maduro, is like, hey, I determine what our blood is worth. And today, he says, you just need around 170,000 bolivares to buy a single U.S. dollar. But the free market on Ruben's website says you actually need 3 1/2 million bolivares to buy a dollar.

ESCARCE: And economists say that's the true value of the bolivar.

GONZALEZ: Huge blow to Maduro's ego.

GALINDO: And so since we allow people to buy and sell dollars at whichever price they like and not the controlled price, they don't like us.

ESCARCE: Mila and the team start posting this real exchange rate on Twitter, and now the whole world finds out just how little the bolivar is really worth.

GONZALEZ: And then Ruben gets a letter.

GALINDO: I was sitting at my desk in my Mexico City desk, and there's an email, a pretty official email, with fonts in all different colors saying this is the Ministry of Finance. What you're doing, we don't like it. And you guys should stop because, if not, we're going to put you in jail from 10 to 15 years. And I think I jumped out of my seat out of excitement.

ESCARCE: So you saw it as a good thing?

GALINDO: And then - I saw it as something that was exciting. We sort of knew that what we were doing was not allowed by the government. We've always known. And that's why we exist.

GONZALEZ: His family - less excited about the whole Venezuelan prison thing.

GALINDO: My mom was scared. My grandma was like, you're so stupid for doing this. My dad was like, you're OK.

ESCARCE: (Laughter).

GALINDO: You're in Mexico.

ESCARCE: Ruben was safe in Mexico, but then he thinks, oh, no, Mila and all of my other employees in Venezuela.

GALINDO: They were right there. They could receive someone knocking on their door right in that moment. And at that point, I started freaking out.

GONZALEZ: AirTM goes quiet. Ruben tells Mila stop publishing the exchange rate while we try to figure out how to get everyone out of the country.

GALINDO: They migrated 25 people either by planes or by cars, buses. And they all walked out through the border.

GONZALEZ: Everyone except Mila.

MILA: I didn't want to. I remember I told Ruben a lot of times, Ruben, I don't want to.

GONZALEZ: Eventually, she realized she had to go. The police were looking for her.

So the police were looking for you. Why?

MILA: They say that the charge is fake exchange rate of the dollar, terrorism...

GONZALEZ: Terrorism?

MILA: Something like that. Yes.

GONZALEZ: Oh, my God. Because you were calculating the exchange rate - like, the real exchange rate, not the official one that the Venezuelan government says, right?

MILA: Yes.

ESCARCE: That's why we're not using her last name.

GONZALEZ: She couldn't say goodbye to anyone. Mila just had to go with her husband and her 7-month-old son.

MILA: I have no words for that because there is no way to decide.

GONZALEZ: Mila left her car, her husband's bike, their apartment and all her special clothes from special moments in her life.

MILA: I wanted to bring everything, and I cannot.

GONZALEZ: Mila and her family arrived at their hideout in a super cold town in the mountains. She kept thinking about her sweaters - her sweaters that were hanging right there in her closet in Caracas.

MILA: I needed, desperately, sweaters, and I didn't have. So every day, when I felt cold, I thought something like, hey, I have, like, 10 sweaters in my house, and now I need just one.

ESCARCE: Ruben put up all of his employees in two houses just over the border in Colombia. He doesn't want to say exactly where.

GALINDO: It was just a quiet little place about two hours from Cucuta. We met there. It was pretty emotional. We had this arepa party.

GONZALEZ: You said you had an arepa party?

GALINDO: Yeah. They made arepas for us. It was super nice.

GONZALEZ: Arepas are basically Venezuela's national food, also kind of Colombia's national food.

ESCARCE: Was it Colombian arepas or Venezuelan arepas?

GONZALEZ: Super important question.

GALINDO: Oh, Venezuelan arepas for sure, with the food in between the bread, not on top.

(LAUGHTER)

ESCARCE: For the next couple months, all of AirTM's Venezuelan employees lived together in this safe house. And they get back to work trading dollars, posting prices. It was crowded and stressful, but everyone had a bed. And Mila says it was worth it.

MILA: I always wanted to do something to change the story of my country, and I think that this is a way - the better way that I can do that - helping the people. They have their way to bring some money to their house.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT NICOLAS MADURO: (Speaking Spanish).

ESCARCE: When President Maduro talks about Venezuela's currency problems, he places the blame on groups like AirTM.

(SOUNDBITE OF ARCHIVED RECORDING)

MADURO: (Speaking Spanish).

ESCARCE: He's saying they're not only criminals, but perverse and illegal.

GONZALEZ: Which actually makes sense. Economists do say that the more people have access to dollars, the more the bolivar drops in value.

ESCARCE: And I wondered what Ruben, the AirTM CEO, thought about this, about the idea that AirTM is making inflation get worse faster. I mean, do you think that there's some truth to that?

GALINDO: Well, we do allow people to exchange their money for dollars easier. And so if the government is afraid of people getting rid of their money easier because that will make it easier for inflation to rise, then, yeah.

ESCARCE: And to be fair, it's not just Ruben who's doing this. People are trading bolivares for dollars on the street, in border towns, with anyone in the world who will trade with them. The government has arrested at least 216 people for calculating the black market exchange rate and for trading money.

GONZALEZ: But who is accepting this money? Who's on the other side? Who wants bolivares? For this, we called up the expert on black-market exchange rates.

STEVE HANKE: Just one second. Let me...

GONZALEZ: Steve Hanke, professor of applied economics at Johns Hopkins University.

ESCARCE: Hanke is the guy you call when your currency is losing value. He's worked with a bunch of countries, even advised the Venezuelan president a couple decades ago.

GONZALEZ: Who wants to buy bolivares, though? If they're not worth anything, what's in it for the people who are exchanging the currency? Like, why would they want to accept that?

HANKE: One group that loves bolivares is the group that has access to the official exchange rate. These are people that are close to the regime.

GONZALEZ: They love bolivar?

HANKE: Of course.

ESCARCE: The few special people who do have access to the really low exchange rate that Maduro came up with, they want bolivares because they only need 170,000 to exchange for a dollar when everyone else needs more than 3 million.

GONZALEZ: These people, they're called los enchufados, the plugged-in people, or the Boligarchs. And this might be one reason why the government would want to keep its fake low exchange rate, because powerful people can make money off of it.

ESCARCE: But the government - they know things are messed up. So they've announced they're just going to start over.

GONZALEZ: Scrap the old bolivar and print a brand-new one. They're calling it the bolivar soberano, the sovereign bolivar. The plan is to take five zeros off the bill. So imagine you had 500,000 bolivares. Now you just have five. Hanke says that will make money easy to carry around again. But...

HANKE: As far as value, it changes absolutely nothing. It will change nothing with inflation. Inflation won't change. The exchange rates won't change.

ESCARCE: Hanke says Venezuela should just adopt the U.S. currency - completely stop using the bolivar and officially dollarize.

HANKE: Just replace the local currency. Get rid of it.

GONZALEZ: El Salvador uses the dollar. Ecuador uses it. But Maduro, he does not want to do this.

(SOUNDBITE OF ARCHIVED RECORDING)

MADURO: (Speaking Spanish).

ESCARCE: Because we're terrible imperialists, and the socialist president doesn't want Venezuela to become a colony of the dollar.

(SOUNDBITE OF ARCHIVED RECORDING)

MADURO: (Speaking Spanish).

GONZALEZ: Yes, but also because something really important happens when a government gives up their currency. They lose their power to print money when they need to pay their bills.

ESCARCE: But that could happen anyway, no matter what the government wants. If Venezuelans get enough access to U.S. dollars, Venezuela could spontaneously dollarize.

HANKE: It conceivably could. This happened in Zimbabwe in November of 2008. Zimbabweans stopped using the - completely stopped. They refused to use the Zimbabwe dollar. And the economy was totally spontaneously dollarized. Then, the government was stuck because no one would use their money, and so they officially dollarized.

ESCARCE: Mila and her co-workers are still helping Venezuelans to get their hands on dollars virtually. But even though she's doing this work, Mila does not want Venezuela to dollarize.

MILA: No.

GONZALEZ: You do not want that?

MILA: No, because my kids and my - future generations would not know the bolivar and that we had our currency.

GONZALEZ: Mila hopes she can go back to Venezuela one day. And the bolivar - her money - it isn't just a piece of paper. It isn't even just money. It's a symbol. Your currency - it's one of the things that makes you your own country.

(SOUNDBITE OF KARL KARLSSON AND KRISSIE KARLSSON SONG, "WAITING FOR YOU")

GONZALEZ: Today's show was edited by Bryant Urstadt and produced by Sally Helm with help from Aviva DeKornfeld and Taylor Haney.

ESCARCE: Alex Goldmark is our supervising producer.

GONZALEZ: We post a link to every episode on Facebook. Leave us a comment on the post. We're also on Instagram. We have pictures. Follow us @planetmoney.

ESCARCE: A super, extra special thanks to Daniel Lansberg-Rodriguez, Alejandro Velasco and John Otis for helping us understand Venezuela's economy.

GONZALEZ: I'm Sarah Gonzalez.

ESCARCE: And I'm Alissa Escarce. Thanks for listening.

(SOUNDBITE OF BRYAN JAMES SAMMIS, OLEN MATTHEW KITTELSEN, SAMUEL GRANT BERESFORD SONG, "LIGHTNING STRIKE")

GONZALEZ: There is one thing Mila really likes about Colombia - the trash.

MILA: That you have to separate the trash in plastics and organic - I love it because in Venezuela, I didn't have seen that before.

ESCARCE: So you like recycling?

(LAUGHTER)

MILA: I like recycling.

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