How Dublin Rickshaw Driver Beats Caracas Currency Market

In Dublin, a 31-year-old bicycle rickshaw driver is in the cross hairs of the Venezuelan government for black market currency trading.

The driver said he’s a former television producer who last year joined the ranks of Venezuelans moving to the Irish capital. For some, the draw wasn’t just the chance to study English in the city of James Joyce and Roddy Doyle: it was a chance to obtain work visas and supplement their income by selling euros on the black market 4,400 miles away in Caracas, even at the risk of jail for breaking Venezuelan currency laws.

Preparing for another 10 p.m. to 6 a.m. weekend shift ferrying passengers across the city, the driver said he sold euros for bolivars three times on the black market back home, with 300 euros ($385) the most at one time. He asked that he not be identified to protect his identity after Venezuela cut off funds to students in Ireland and threatened to imprison students guilty of currency fraud for as long as seven years.

This month, Irish authorities laid out a plan to combat abuses in English language schools acting as “visa factories” after Venezuela’s government said the real purpose of some schools was to allow students work. As President Nicolas Maduro’s administration faces a shortage of foreign currency and upcoming bond repayments, it also suspected that students were taking advantage of a complex system of exchange rates that sold them euros at a preferential rate for educational purposes.
Under that system, students could buy the currency for about for 8.1 bolivars per euro. The students could then sell the euros, together with any cash earned by working in Dublin, back on the illegal black market, where a euro currently fetches more than ten times the official rate.

Currency Controls

The South American country has maintained strict currency controls introduced by former President Hugo Chavez since 2003. Under the system, importers of food and medicine and students studying authorized subjects abroad could buy dollars at the official rate of 6.3 bolivars.

On the black market, one dollar currently buys about 97 bolivars and a euro fetches 124, according to dolartoday.com, a website that tracks the rate at the Colombian border. The bolivar has lost 58 percent of its value on the black market in the past year.

Students moving abroad could apply for school fees, medical insurance and about 1,300 euros a month for maintenance. Students said they could sell the euros at the black market rate through online trading sites or when traveling home.

Black Market

The number of Venezuelans registering to live in Ireland rose to 2,413 in 2013 from 274 in 2008. Suspicious that students were in Ireland mainly to work, and playing the black market, Venezuela began tapering off euros to the students earlier this year, before blocking all transfers in June.

Around the same time, the former television producer started working as a rickshaw driver, he said in an interview in a cafe just off Grafton Street, a busy city center area teeming with bars and stores. Students who could find work stayed, while others left, he said. The students said they have been impoverished by the government’s decision to cut off euros.

Venezuela’s embassy in London, which covers Ireland, didn’t reply to e-mail or phone requests for comment.

The system “will return at some stage,” said Tiago Mascarenhas, marketing director at Seda College, a bustling English-language school in Dublin. “They will look for a better process. This is just the way it happens in Venezuela – everything changes.”

Choose Ireland

In 2013, 617 Venezuelans enrolled in Seda, rising from seven three years earlier. Now, the number of new students from Venezuela has dropped to almost zero, Mascarenhas said. He said Seda ensures students abide by government rules, including a requirement that they attend at least 80 percent of classes.

Students say they chose Ireland for a number of reasons. First, studying in Dublin is cheaper than London, for example. Second, until June, Venezuelan students coming to Dublin didn’t need a visa before arriving.

Once in Ireland, they applied for a visa, allowing them to work 20 hours a week while studying and 40 hours a week when courses finish. Venezuelans could take cash earned by working in Dublin, add them to those provided by the state, and sell them on the black market.

Three months ago, the government changed the visa system, partly “on concerns regarding sudden changes in the pattern of Venezuelan immigration to Ireland,” the Justice Ministry said in an e-mail response to questions. Since June 24, Venezuelan students must apply for a visa before entry.

Prosecutor Probe

Earlier that month, Cencoex, which runs Venezuela’s exchange system, said it had asked prosecutors to probe whether students in Ireland had obtained foreign currency for uses other than those for which they had requested.

Virtually all Venezuelan students in Ireland engage in currency arbitrage, said a second student who asked that she not be identified, speaking over coffee near St. Stephen’s Green. The woman, who said she’s working in a hotel, said Venezuelans are entitled to do so because they own the bolivars the government exchanged for euros.

Cencoex asked for Irish government assistance to check attendance records for about 600 Venezuelans at Dublin language schools which have closed down.

Three schools shut as immigration authorities suspended them from taking on new students while investigating “alleged irregularities” on immigration, a government task-force said in a report in July. Other schools have since closed “at short notice,” the Justice Ministry said.

Immigration Permission

“I have to be satisfied that the service we are selling is quality education rather than immigration permission,” Irish Justice Minister Francis Fitzgerald said in a speech on Sept. 2. “In respect to certain parts of the industry, I am simply not satisfied that this is the case.”

Some students said they have done nothing wrong and linked Venezuela’s decision to cut off funds to a need to hoard dollars and euros as bond repayments near. Venezuela has $4.5 billion of dollar bonds maturing in October, according to data compiled by Bloomberg. The country’s foreign reserves reached an 11-year low of $20 billion on Aug. 21.

Venezuela’s bonds tumbled after Harvard University economist Ricardo Hausmann this month questioned the government’s decision to pay bondholders in the face of shortages of everything from basic medicine to toilet paper. Maduro promised on Sept. 10 to pay Venezuela’s obligations “down to the last dollar.”

Cutting off euros “is a blanket approach to English language schools and to English language students by the Venezuelan authorities that seems to be based on several misunderstandings,” David Moore, spokesman for the Dublin-based Irish Council for International Students, said in a statement in June. He said that attendance records may not have been kept by some schools.

“It would be wholly unjust if charges were pressed against students by the Venezuelan authorities on the basis of the deficiencies of others,” he said.

Venezuelans have begun seeking asylum in Ireland, with 25 applications in the first eight months of the year, according to the Justice Ministry. There were none in 2012 or 2013.

Rickshaw Business

Meanwhile, joining the other Venezuelans and Brazilians who dominate the rickshaw business in the city, the former television producer is getting ready for work.

Speaking in English, he said he pays 80 euros a week to hire a rickshaw and lives on his tips. On weekdays, he works until 4:30 a.m., he said.

He said he makes around 200 euros a week, pulling revelers through Dublin’s streets. His job has at least one upside, he said, as he prepares to resume his studies after cutting a deal with his language school on the price.

“It’s good for my English,” he said

To contact the reporter on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net

To contact the editors responsible for this story: Heather Harris at hharris5@bloomberg.net Nathan Crooks, John McCorry

[In the image: Venezuela has maintained strict currency controls introduced by former President Hugo Chavez since 2003. | Photographer: Meridith Kohut/Bloomberg]