Venezuela Currency Disintegrates: Down 16% Today

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.


land_of_the_few IronSights on'um Fri, 08/04/2017 - 12:41 Permalink

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…“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"… 

In reply to by IronSights on'um

youngman Fri, 08/04/2017 - 11:54 Permalink

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...

Vorian Atreides Fri, 08/04/2017 - 11:59 Permalink

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.......

khnum Fri, 08/04/2017 - 12:03 Permalink

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 Fri, 08/04/2017 - 12:00 Permalink

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 hoytmonger Fri, 08/04/2017 - 12:59 Permalink

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 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.

In reply to by hoytmonger

GRDguy Fri, 08/04/2017 - 12:03 Permalink

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.