Chris Werner (Venezuela)
Hillsborough High School
Economic and Financial
Informal Value Transfer Systems
Background of Informal Value Transfer Systems
An informal value transfer system (IVTS) refers to “any system, mechanism, or
network of people that receives money for the purpose of making the funds payable to a
third party in another geographical location.” Using an IVTS, brokers wishing to transfer
money across state borders avoid interaction with formal financial institutions. When
dealing with an IVTS, people wishing to transfer money can do so in a system of
anonymity and also forego government regulations and excess fees imposed by formal
financial institutions.
Informal Value Trade Systems in Latin America
In South and Latin America, migrants will often use informal channels to send
remittances. Clients left with no other viable options turn to IVTS, which is often the
case in South and Latin America, because of either corruption or distrustful banking
institutions. Migrant workers use these methods of an IVTS legitimately is immigrant
workers. Many immigrant workers, those especially in the regions of Latin America,
immigrate to America to earn a higher wages and then send money back home, ensuring
a better lifestyle for their families, making use of the ‘remittance’ system. They are able
to send funds back without incurring charges that would significantly diminish the
amount of money being transferred. Popularity for informal value transfer systems is also
high due to the fact that for certain underdeveloped states, there is a lack of reliable
formal financial institutions, leaving an IVTS as the only option for transferring money.
Black Market Peso Exchange
One of the most well-known illegitimate IVTS in South and Latin America is the
Black Market Peso Exchange (BMPE). Currency controls implemented by the
Colombian government to collect taxes and duties reduced the profitability of importers
who needed hard currency for international transactions. BMPE brokers bought US
Dollars at official exchange rates and sold them to these importers at a premium on the
black market. Importers consented to this transaction as the premium over the official
exchange rate was still significantly less than the tax expense they would have incurred
by conducting business legally. Eventually the growth of the Colombian narcotics
industry created a parallel market to the importers, as drug cartels needed to convert US
dollars into pesos, and the BMPE flourished. Today, the BMPE works almost exclusively
to launder money earned by drug trafficking.
Venezuela and IVTS
Venezuela has been ruled by eleven different military regimes since
independence. Venezuela has seen foreign influence ruin the Venezuelan economy and
collapse of several attempts of the democratic state. Keeping this in mind, Venezuela
recognizes the value and importance of the IVTS however feels that the with current
economic status of Latin American countries, restricting the free market would not only
limit economic interests, it would also alienate Latin American nations further from
profitable sources of revenue. Venezuela considers it desirable for the Union of South
American Nations, to monitor IVTS’s and through joint member participation,
agreements can be decided upon. The Union establishes a common market Member
States of the Union all have similar economic interests, are effected by Bolivarian
ideology, and most member states are directly affected by the Black Market Peso
Exchange (BMPE) as a result of organization operating in most Latin American
countries. Personally, Venezuela would look favorability of providing incentives for
Venezuelans to use national finical institutions as opposed to IVTS. Venezuela also
believes that IVTS causes the devaluation of currency when it is used not only in illicit
activities but whenever it is used because world currency is being laundered and
processed freely on the world market. Venezuela believes we may be able to lower
inflation thus bringing more stability to that currency.
Goals at Conference
In order to protect Latin American interests we must develop legitimate
regulations without western imperialistic interference. Without a joint cohesive goal
decided upon, we may never be able to operate self-functioning stable governments,
without a dependence on western imperialism. The global market is a free market
economy in which no country has the right to put restrictions and embargos on another
country without that country’s consent. Venezuela will not support any resolution in
which the United States creates mandates on Venezuela or any other Latin American
nation. Venezuela also it not willing to support any resolution restricting IVTS linked to
terrorist activities outside Latin America. Thus, Venezuela is aware of terrorist links to
IVTS, many of which operate out of Africa, the Middle East and Asia and bearing this in
mind, Venezuela, not feel this conference is about the United States Foreign Policy on the
War on Terror, so while terrorist activates in relationship to IVTS are important,
Venezuela feels they are not relevant to IVTS in Latin America. Individual countries can
take steps to eliminate an IVTS within their own borders, but unless other countries
implement similar measures, an IVTS will always exist, so Venezuela feels we need to
work as a unified South America to root out the corruption of IVTS and their infiltration
of our Latin American governments and keeping the positive IVTS to protect Latin
American Migrant workers and other business interests.