Venezuela Currency Disintegrates: Down 16% Today

Tyler Durden's picture

Venezuela's currency, the bolivar, is disintegrating at an incredible pace under the country's political and economic crisis that has left citizens broke, desperate and in many cases, homicidal. The depreciation accelerated this week, after a disputed vote electing an all-powerful "Constituent Assembly" filled with allies of President Nicolas Maduro, which the opposition and dozens of countries have called illegitimate.

 Just two days ago, on August 2, we reported that one dollar would buy 14,100 bolivars, up from 11,280 the day before.

The next day, the bolivar slumped nearly 15 percent on the black market, to 17,000 to one US dollar. Today, it has crashed again, tumbling 16% to 20,142, and down almost 40% in just the past three days.

In the past year, the currency increasingly looks like shares of DryShips, having lost over 96% while the longer-term chart is simply breathtaking.

 

The decline, in France24's words, has been "dizzying" yet completely largely ignored by the government, which continues to use an official rate fixed weekly that is currently 2,870 to the dollar, and which is completely useless. Meanwhile, ordinary Venezuelans refer only to the black market rate they have access to, which they call the "dolar negro," or "black dollar."

"Every time the black dollar goes up, you're poorer," resignedly said Juan Zabala, an executive in a reinsurance business in Caracas. His salary is 800,000 bolivares per month. On Thursday, that was worth $47 at the parallel rate. A year ago, it was $200. The inexorable dive of the money was one of the most-discussed signs of the "uncertainty" created by the appointment of the Constituent Assembly, which starts work Friday.

As a result, those Venezuelans who are able to are hoarding dollars and other currency alternatives.

"People are protecting the little they have left," an economics expert, Asdrubal Oliveros of the Ecoanalitica firm, told AFP.

 

Zabala -- who is considered comparatively well-off -- and other Venezuelans struggling with their evaporating money said they now spent all they earned on food. A kilo (two pounds) of rice, for instance, cost 17,000 bolivares. The crisis biting into Venezuela since 2014 came from a slide in the global prices for oil -- exports of which account for 96 percent of its revenues.

 

The government has sought to monopolize dollars in the country through strict currency controls that have been in place for the past 14 years. Access to them have become restricted for the private sector, with the consequence that food, medicines and basic items -- all imported -- have become scarce.

According to the International Monetary Fund, inflation in Venezuela is expected to soar above 700 percent this year. In June, Maduro tried to clamp down on the black market trade in dollars through auctions of greenbacks at the weekly fixed rate, known as Dicom. There is also another official rate, of 10 bolivars per dollar, reserved for food and medicine imports.

"Things are going up in price faster than salaries," noted Zabala, who spends 10 percent of his income on diabetes treatment, when he can.

Meanwhile, Maduro who earlier this week was branded a "dictator" by the US State Department, has vowed that a new constitution the Constituent Assembly is tasked with writing will wean Venezuela off its oil dependency and restart industry, which is operating at only 30 percent of capacity. But Maduro, who links the "black dollar" with an "economic war" allegedly waged by the opposition in collaboration with the US, has not given details on what would be implemented. Instead, on Thursday Maduro promised that "speculators" setting their prices in line with "the terrorist criminal dollar in Miami" would go to jail.

Against that backdrop of tensions, "there is no limit on how far the black dollar can go," according to Ecoanalitica.

 

But a director of the firm, Henkel Garcia said he believed the current black market rate "didn't make sense" and he noted that in the past currency declines weren't linear.

 

Oliveros said increased printing of bolivares by the government was partly the reason for the black dollar's rise. "When you inject bolivares into the market, that means that companies, individuals go looking for dollars, which are scarce," he said, estimating that the shortfall of dollars this year was some $11 billion.

And as Latin America's socialist paradise succumbs to Venezuela, it has further headaches ahead: Venezuela has to make major debt payments, with a $3.4 billion dollar-denominated payment for state oil company PDVSA looming in October. It is increasingly unclear if the company will make the payment.

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Soul Glow's picture

Bolivar burning.

Killtruck's picture

That chart looks remarkably similar to the US Dollar since 1900. 

SAD! 

GUS100CORRINA's picture

Venezuela Currency Disintegrates: Down 16% Today

My response: It also looks like the inverse of volatility in the US markets. See chart below.

http://www.finviz.com/quote.ashx?t=TVIX&ty=c&ta=0&p=m

These markets are COMPLETELY and UTTERLY broken!!!!! This is what happens when Keynesian Socialists are at the helm.

Ghost of Porky's picture

Socialism will work next time.

MagicHandPuppet's picture

LOL.  "They just aren't doing it right!"

Blue Balls's picture

ZH just gave every zionist reader a wet dream.  

Richard Chesler's picture

Yea but they have free healthcare and free access to non-existing medicines.

Socialism rules!

 

Secret Weapon's picture

Pretty soon we will have single payer government insurance with unlimited access to non-existant treatment and non-existant doctors. 

land_of_the_few's picture

But seriously, who gives a f**k about black market rates from one disgruntled ex-military Venezuelan coup guy who works in Home Depot in Hoover, Alabama?

QE4MeASAP's picture

Imagine California seceding and creating its own currency.  Same thing would happen.  By God let it. 

1033eruth's picture

You don't understand.  Then you'll be saying the same  thing about Wasington State, Illinois and all the rest of the bought and paid for states.  Give it 50 years and you'll be backed into a corner giving every state away that's been contaminated by socialism.  And you think that's a good idea?  WHY?

Stackers's picture

And they still try to blame this mess on the "slide in oil prices"

BULLSHIT. This has been decades in the making from failed socialist policies.

Antifaschistische's picture

many theories on why they are, where they are....

there's one thing I know I know....

If a Venezuelan had put their savings into gold 10 years ago....they'd be able to buy a beautiful villa in one of the elite escape locals of Venezuela.

....this story keeps repeating itself across the globe over and over.

IronSights on'um's picture

where am I going wrong?  If 1 usd = 20k bolivar why do the gold sites say 1oz of gold is equal to 12,600 bolivar?

Antifaschistische's picture

that must be stuck on what it was 10 years ago.

land_of_the_few's picture

It's because the rates quoted here are BLACK MARKET RATES not OFFICIAL rates.

DOLARTODAY website guy Gustavo Diaz works in a Home Depot in Albama.

Venezuelan Coup Colonel Manipulates Country's Currency from US

http://www.telesurtv.net/english/news/Venezuelan-Coup-Colonel-Manipulate...

“DolarToday is the Empire’s strategy to push down the currency and overthrow Maduro”

"with DolarToday in Alabama, I do more damage to the government than I did as a military man in Venezuela"

https://www.wsj.com/articles/venezuelas-nemesis-is-a-screw-salesman-at-a...

 

Stroke's picture

Too bad they don't have a Bernanke & a helicopter

Clock Crasher's picture

doing better than First Majestic, ok thats not completely fair

2ndamendment's picture

They'll just seize more foreign assets. See? Problem solved. ;-)

GoldHermit's picture

Ain't Socialism grand!

khnum's picture

The IMF and deep state did well(sarcasm) after all we cant have an independant socialist state that actually works can we

Doctor Faustus's picture

Just curious, when has "an independent socialist state" ever worked?

khnum's picture

No the zionist national socialist empire always wrecks them

shizzledizzle's picture

They should pile into crypto... Oh wait. 

earleflorida's picture

The concentration of wealth in few hands in [ANY] country almost suredly 'spells doom'!...--- for any ideolgical/ political society. Period!!! 

khnum's picture

The bottom 80 percent of US citizens have 15 per cent of the wealth would that be doomish?

I am Jobe's picture

The just need to go wars with the neighbouring countries. Look at the USA. All is great, raping their citizens thru wars. 

Atomizer's picture

They can burn empty toilet paper rolls to cook food. Keep a watchful eye for road kill on the streets. 

Haitian Snackout's picture

The rubber boots and machete might have been a good investment.

Sizzurp's picture

Some people have no business voting.  In this case they voted for Chavez and Maduro and now they have no vote and no future.

e_goldstein's picture

Looks like they solved Venezuela's toilet paper shortage.

youngman's picture

Just think of the money being made on the border...take the black dollar in trade..then exchage with the government rate....and you get many more Colombian Pesos for your work...

Weirdly's picture

"...exchange at the government rate."  Good luck.

Vorian Atreides's picture

Hey Bernie--as in Sanders--I hope you're following the death spiral of this country and the untold misery it's forcing on its citizens. Why are you stupid and continue to preach Socialism? You hypocrite--living in thee different houses-- because of Capitalism. You should go live in downtown Caracas for 12 months and come back and tell us how great Socialism is.......

Arnold's picture

If only people were properly educated for free....

--Bernie

Jason T's picture

LOL commies!

 

khnum's picture

Ah the victory of capitalism over socialism,you may well wish to look up Ayn Rands definition of capitalism it hasnt existed yet what actually happened was the forces of a national socialist zionist empire wrecking an independant socialist state,if you are familiar with Hillary's leaked e-mails you would know she personally led the team to discredit Chavez and his form of socialism.

hoytmonger's picture

Chavez' form of socialism seems to have discredited itself.

khnum's picture

They didn't help their own cause with all the corruption etc but what I am trying to point out is Western forces played a major part in it all unravelling ala confessions of an economic hit man style,spook interference,demonisation etc.

hoytmonger's picture

Point taken, and I agree.

If the US really wanted to disrupt the Venezuelan economy, it could just ban export of light crude to Venezuela. They would no longer have an exportable product as their crude is 'extra heavy' and requires dilution.

PrezTrump's picture

you socialists ALWAYS blame others for your own moronic ideas.  I remember my friend saying oil would be above 100/bbl forever.  I not only told him that wouldnt last, I told him venezula would become a shithole.  

hoytmonger's picture

I read an article on "The Saker" a couple of days ago about the election in Venezuela. It defended Maduro stating the clauses in the Venezuelan constitution that allowed his actions and proved his legitimacy. It also stated the opposition was completely illegitimate and vassals of the US. It didn't state anything about the economic crisis or people suffering.

In the comments section, there was full support of Maduro and the Venezuelan government. I chimed in and noted the economic situation was dire and that the government was largely at fault. I didn't realize that site was so sympathetic to socialist causes. They responded by telling me that it was mostly the oppositions fault the economy was tanking and that the government was benevolent since it hasn't killed off the opposition yet, being that they were working for the CIA.

I thought maybe I was being deceived by fake news and propaganda, so I researched as best I could, using only indie sites and first hand accounts from Venezuelans. I found that while the opposition has indeed caused economic turmoil, the Venezuelan government is inept and seemingly desperate to hold on to power by punishing businesses for trying to make enough money to stay in business. The commenters on "The Saker" accused the businesses of "hoarding" their goods when price restrictions are made then selling their products on the black market so they could make more money... as if that's a bad thing.

The information coming from Venezuela is being spun from both sides and I don't know who to believe anymore.

Friedrich not Salma's picture

I know a few people who have/had businesses in Venezuela.
Bus. 1) Government capital controls prevented them from obtaining raw materials (iron) from other countries. Business slowed, professional employees left the country.

Bus. 2) Ven. government bought goods from them and delayed payments for many years (US$12 million). Owners left country and run a shell staff to keep it going just in case things turnaround. (They won't)

Bus. 3) Company packaged food items. Government accused them of gouging and of substituting inferior products in order to takeover the business for "the people." Government troops came one day to takeover the business and troops just scavenged saleable equipment and the factory is not usable. Owners left the country.

These stories are typical. All of these businesses took good care of employees and two provided money for the children to attend school. I have looked for evidence that "the elite" are causing this (and hording goods) to punish Venezuela but I find not evidence and the people I speak with don't suspect the USA is rigging anything.

My conclusion, at this time, is that Ven .gov caused all of the issues and that .gov and .mil are making a lot of money on the oil and on drug trafficking and aren't about to step aside based on elections.

.gov supporters (Chavistas) receive weekly food and the people who voted against .gov receive nothing. (I'm not a big fan of Vice.com but a youtube search of vice venezuela will show a decent vid.)

The people of Venezuela are really screwed. The qualified ones got out, the rest (non-chavistas) are literally slowly starving to death.

The "peoples revolution" there with Chavez began ahead of the low oil prices. Hugo had already screwed the business community. I'd like to point to an "oil price conspiracy" but the timelines don't match. If oil prices were higher, maybe things wouldn't be so desperate but it would only serve to slow the collapse.

Now there is hyperinflation. I think that this sort of inflation benefits those closest to the source of money (.gov/.mil) as they can purchase before the effects are felt. Those furthest away, like Joe Blow (Juan Blow), feel it the most.

Edit: It is nearly impossible for companies to fire workers. A .gov agency, which supports "the people's revolution" always finds in the favor of the fired employee and the company must hire them back and pay the back-pay. This leads companies to bribe employees to quit. But employees then go to .gov and explain the bribe and the companies must hire the employee back. I have heard first-hand accounts of this from Ven. employers.

just the tip's picture

does "the saker" state on it's website how long bernie sanders has been the website administrator?

GRDguy's picture

There are banks in Venezuela that belong to the BIS group, as well as branchs of U.S. banks.

And they permit this.  Must be in on it.