MIAMI — Air Canada has filed an arbitration proceeding against the government of the Bolivarian Republic of Venezuela over funds trapped in the country, a spokesman confirmed today.
The proceeding was filed by the airline on January 13, and it was registered yesterday by the International Center for Settlement of Investment Disputes (ICSID), the World Bank’s arbitral body.
The institution did not provide any details on the nature of the claim, and Air Canada declined to provide further comments or details on the matter.
Since 2014, international carriers serving Venezuela have faced difficulties to settle repatriated funds in foreign currency, arising from the sale of passenger tickets and cargo space in Bolivars, the local currency.
Air Canada was the first airline to take measures by suspending its flights from Toronto to Caracas, the capital city of the Latin American country. At that time, the airline cited an “ongoing civil unrest” in the country as the cause of the suspension “until further notice.”
Air Canada had around $35 million in cash trapped in Venezuela valued at an exchange rate of Bs6.30 to $1 before suspending flights in May 2014.
Other carriers such as Aeromexico, Alitalia, GOL, LATAM and Lufthansa, have opted to suspend their flights to Caracas, while others have drastically reduced their frequencies or closed routes, such as American and Delta Air Lines, which decided to write-off their remaining cash in Bolivars, totaling $592 million and $75 million, respectively, in the fourth quarter of 2015.
The decline in air travel in Venezuela has been steady. The lack of a commitment between the government and foreign carriers to clear the trapped funds, the Venezuelans’ dwindling purchasing power, and the unending economic distortions has caused more international routes to shut down, leaving the country with even less connectivity and more isolation from the world.