Venezuelans Abandon Bolivar - Merchants Insist On Being Paid In Dollars

Venezuelans are struggling to carry out basic transactions like purchasing food as the value of their currency, the bolivar, has plunged against the dollar amid the country’s worsening economic collapse.

According to Reuters, over the past year, Venezuela’s currency weakened 97.5% against the greenback: Put another way, $1,000 of local currency purchased in early January would be worth just $25 now. The annual inflation rate in 2017 could reach $2,000. Though at least one other estimate puts the real rate of inflation closer to 2,800%.

Of course, President Maduro has blamed websites like DolarToday – which publishes the closest thing to an official black-market rate by surveying clandestine exchanges in Caracas and other cities – for the spread of black-market activity, part of a conspiracy organized by Washington and his local political opponents to force him from power.

One of the unintended consequences of the bolivar’s collapse has been a social experiment of sorts in the use of digital currencies: As we noted back in October, as many as 100,000 people are now mining digital currencies in Venezuela, defying a government crackdown that’s seen many of them thrown in prison.

But for those who can’t or haven’t resorted to transacting in bitcoin, an increasingly scarce supply of dollars is creating intractable problems for millions of Venezuelans, Reuters reported.

For many, simple purchases like a new tire for their car are simply out of reach.

There was no way Jose Ramon Garcia, a food transporter in Venezuela, could afford new tires for his van at $350 each.

 

Whether he opted to pay in U.S. currency or in the devalued local bolivar currency at the equivalent black market price, Garcia would have had to save up for years.

 

Though used to expensive repairs, this one was too much and put him out of business. "Repairs cost an arm and a leg in Venezuela," said the now-unemployed 42-year-old Garcia, who has a wife and two children to support in the southern city of Guayana.

 

"There’s no point keeping bolivars."

A practice that was initially adopted by shops catering to wealthy and middle-class Venezuelans is spreading to merchants selling everything from foodstuffs to medicine. Food sellers, dental and medical clinics, and others are starting to charge in dollars or their black-market equivalent - putting many basic goods and services out of reach for a growing number of Venezuelans.

"I can’t think in bolivars anymore, because you have to give a different price every hour,” said Yoselin Aguirre, 27, who makes and sells jewelry in the Paraguana peninsula and has recently pegged prices to the dollar. “To survive, you have to dollarize."

 

The socialist government of the late president Hugo Chavez in 2003 brought in the strict controls in order to curb capital flight, as the wealthy sought to move money out of Venezuela after a coup attempt and major oil strike the previous year.

 

Oil revenue was initially able to bolster artificial exchange rates, though the black market grew and now is becoming unmanageable for the government.

Still, President Nicolas Maduro has maintained his predecessor, the late Hugo Chavez’s policies on capital controls, even as the spread between the official rate - some 10 bolivars per dollar - and the black market rate - of around 110,000 per dollar - is now huge.

The trend is angering Venezuelans who don’t have access to dollars. As Reuters pointed out, it also dampened Christmas celebrations this year due to a shortage of pine trees, toys, meat, chicken, cornmeal…the list goes on.

While sellers see a shift to hard currency as necessary, buyers sometimes blame them for speculating.

 

Rafael Vetencourt, 55, a steel worker in Ciudad Guayana, needed a prostate operation priced at $250.

 

“We don’t earn in dollars. It’s abusive to charge in dollars!” said Vetencourt, who had to decimate his savings to pay for the surgery.

Most Venezuelans, earning just $5 a month at the black-market rate, are nowhere near being able to save hard currency.

"How do I do it? I earn in bolivars and have no way to buy foreign currency," said Cristina Centeno, a 31-year-old teacher who, like many, was seeking remote work online before Christmas in order to bring in some hard currency.

While many have begun mining bitcoin, purchasing the digital currency is also out of reach for many, since they would need to first convert their bolivars into dollars.

As the bolivar has continued to plummet, some communities have begun experimenting with alternative currencies that derive their value from a limited supply. In one Caracas neighborhood, several shops have started accepting the panal, one such alternative currency.

With the supply of dollars drying up since Maduro announced that the state-owned oil company would no longer settle payments for oil exports in greenbacks, it’s likely only a matter of time before more of these alternative paper currencies start springing up.

That is, unless the price of oil – which broke above $60 today – makes a surprising and altogether unlikely comeback.

Comments

Endgame Napoleon shitshitshit Wed, 12/27/2017 - 10:02 Permalink

Say goldbugs are right then. If they had gold, how would they use it? Would they trade it for dollars? Who would buy it for dollars, assuming that is the currency that buys them basic sustenance? Wouldn’t the merchant who accepted gold for life-sustaining goods offer them less than it is worth?

You would think a food delivery guy would get some help from his employer or someone. That job seems like it fills a practical need and would have some value, even in a collapsed market. Maybe, food delivery guys are a dime a dozen, so they just use up the ones who have functional tires, moving on to the next delivery guy. Sounds like capitalism.

In reply to by shitshitshit

dumluk Bulgars Wed, 12/27/2017 - 08:24 Permalink

I would seem they have no problem to print lots and lots of Bolivars, but to what end? Hyperinflation.........For the moment, they can turn to dollars, but the dollar is ultimately destined for the same fate as the Bolivar unfortunately and for the same reason as to why Venez is a failed State. Bad management............Enjoy your dollars while you can folks......Spend em liberally.......Cuz one morning soon were gonna wake up to a new reality.......the dollar is no longer the petro currency of choice.........

In reply to by Bulgars

I am Groot end times prophet Wed, 12/27/2017 - 02:57 Permalink

They have no gold, no guns, and no food. The idiots are lucky they have underwear on. Between the rolling blackouts, the riots, the extreme food and medicine shortages, that place is one step from going totally Mad Max, all in. I wouldn't rule out cannabalism either. But hey, that's socialism, all wrapped up in a nice warm fuzzy blanket for ya.

In reply to by end times prophet

new game I am Groot Wed, 12/27/2017 - 05:49 Permalink

bernie, BERNIE, BERNIE! for prez - of course. s/when we run out of other peoples money, then we go back to work. oh wait, no economy, no work, no nothing but strife. yeah baby, millenials suk ass, dumbest fuking generation yet. DEVOLVE. OH, YEAH, GO SMOKE SOME DOPE, CAUSE YOU SO STRESSED OUT. FUKEN LOOSERS...RANT OVER...

In reply to by I am Groot

WOAR HRClinton Wed, 12/27/2017 - 03:50 Permalink

The point of gold is to hold it before shit hits the fan. Then, you can trade it to get out. Mining cryptos is also hard, if you've read the article. They can't convert their bolivars to dollars, and therefore to bitcoin. In other words, if they held bitcoin OR gold, they would've been better off.Fiat currencies are dying, and it's only a matter of time before something replaces them.

In reply to by HRClinton

new game WOAR Wed, 12/27/2017 - 06:13 Permalink

at world wide 3 x debt to gdp things start to come unglued, unstable, fuked. simple shit maynard...blame the debt of fiat, ultimate ponzi of your labor. "I saved it and now it is worthless."merikans will get a wake up call and be destitute someday...full circle to "yuan backed gold" lol, as i don't trust the khinks either.humans are hopeless as they get no trust from me.worse yet, there is no trust in guv.org, the ultimate ponzi planners that stip mine labor and consolidate it in hands of a few with the illusion your labor is safe.fiat backed by scammers making sure the dumber idiots stay stupid.and the alternative? "as we devolve we evolve" to open markets of exchange for only what we need. that is until all the mouths can not be fed. coming to a country near you. simple laws of supply/demand of limited resources. 

In reply to by WOAR

TruthHunter end times prophet Wed, 12/27/2017 - 06:57 Permalink

The illiquidity of gold makes it useless ...for me.Same with bitcoin. It appears to me to be the equivalent of going to the Fed to confirm my debit card purchase. If someone sold gold in gram and 100 mg "bullion" plastic carriers, matbe it could work as a supplement to fiat...Mass market ways to test the integrity and demand might take off.

In reply to by end times prophet

Endgame Napoleon TruthHunter Wed, 12/27/2017 - 10:18 Permalink

That is what I was thinking. They cannot spend gold for food, shelter or the basics, like that guy’s work vehicle.

Gold and cryptos are really ways for people who have extra money to save it and, possibly, to make big purchases so that the transaction fee is insignificant.

Also, I do not see how economists will measure the [savings rate] of various countries if cryptos become too prominent. Cryptos appear to lack national boundaries. This will affect nationial economies, not necessarily in a good way, right?

I guess global stocks are the same. But they are wrapped up in 401ks with a bunch of different stocks, managed by companies in the person’s own country. The amount of savings seems more measurable.

In reply to by TruthHunter

khnum Wed, 12/27/2017 - 02:11 Permalink

Recently I saw a picture of a female Venezuelan army member being presented with tampons and toilet paper for services rendered...aint socialism grand

GooseShtepping Moron Wed, 12/27/2017 - 02:15 Permalink

So, doesn't this give the lie to the libertarian notion that prices will normalize relative to any amount of currency? According to theory, it should not matter whether the total money supply is $1, $100, or $1 billion, since prices will either inflate or deflate on a proportional basis. As long as people are still working and producing as much as before, it shouldn't make any difference.No, I think Venezuela's problems have nothing to do with the money supply and a lot to do with the breakdown of economic activity. The drop in oil prices and their crumbling oil infrastructure have severely impeded their ability to export their main cash cow, and they have no other major economic activity to speak of.

Billy the Poet GooseShtepping Moron Wed, 12/27/2017 - 02:38 Permalink

I'm unfamiliar with any such "libertarian" concept but here's the Austrian Economics take on the matter: The fallacy of the price-level concept is further shown by Mises's analysis of precisely how prices rise (that is, the purchasing power of money falls) in response to an increase in the quantity of money (assuming, of course, that the individual demand schedules for cash balances or, more generally, individual value scales remain constant). In contrast to the hermetic neoclassical separation of money and price levels from the relative prices of individual goods and services, Mises showed that an increased supply of money impinges differently upon different spheres of the market and thereby ineluctably changes relative prices.Suppose, for example, that the supply of money increases by 20 percent. The result will not be, as neoclassical economics assumes, simply an across-the-board increase of 20 percent in all prices. Let us assume the most favorable case — what we might call the Angel Gabriel model — that the Angel Gabriel descends and overnight increases everyone's cash balance by precisely 20 percent. Now all prices will not simply rise by 20 percent; for each individual has a different value scale, a different ordinal ranking of utilities, including the relative marginal utilities of dollars and of all the other goods on his value scale. As each person's stock of dollars increases, his purchases of goods and services will change in accordance with their new position on his value scale in relation to dollars. The structure of demand will therefore change, as will relative prices and relative incomes in production. The composition of the array constituting the purchasing power of the dollar will change.If relative demands and prices change in the Angel Gabriel model, they will change much more in the course of real-world increases in the supply of money. For, as Mises showed, in the real world an inflation of money is alluring to the inflators precisely because the injection of new money does not follow the Angel Gabriel model. Instead, the government or the banks create new money to be spent on specific goods and services. The demand for these goods thereby rises, raising these specific prices. Gradually, the new money ripples through the economy, raising demand and prices as it goes. Income and wealth are redistributed to those who receive the new money early in the process, at the expense of those who receive the new money late in the day and of those on fixed incomes who receive no new money at all. Two types of shifts in relative prices occur as the result of this increase in money: (1) the redistribution from late receivers to early receivers that occurs during the inflation process and; (2) the permanent shifts in wealth and income that continue even after the effects of the increase in the money supply have worked themselves out. For the new equilibrium will reflect a changed pattern of wealth, income, and demand resulting from the changes during the intervening inflationary process. For example, the fixed income groups permanently lose in relative wealth and income/ https://mises.org/library/austrian-theory-money

In reply to by GooseShtepping Moron

Harry Dong Wed, 12/27/2017 - 02:19 Permalink

True story, the pushy Venezuelans would be called "two of those" in south Florida back in the day. Price was no object..just gimme two of those. I'll have to look up the Spanish derogatory term exactly, but I can sure tell you they are not missed at Disney world. See, sometimes karma does work.

And that reminds me. The Spanish culture always saves in silver and gold. Surprised this isn't a story on how things are priced by gram. It's a heritage thing.

Whatever, hope they figure it out and get some manners in the meantime.

Endgame Napoleon Harry Dong Wed, 12/27/2017 - 11:01 Permalink

Hmmm. I have only met one Venezuelan. This was when I was working at the Department of Human Services, where I met a mountain of Mexicans who qualified for a ton of free EBT food from Uncle Sammy, when they presented evidence of traceable income from a spouse that fell below the earned-income limit for welfare, proof of expenses and multiple SS cards of US-born children.

As long as they had high womb productivity, they got more in free monthly EBT food than I made in a week as a college grad, handling an 800-case load. I cannot say that all of them were nice, like the mom who waved a medical bill for her boyfriend right under my nose, screaming you will pay this. DHS did pay it via a form called the TWISS form, which, back in the Bush days, was faxed from hospitals to DHS, resulting in paid-in-full hospital bills for every member of an illegal alien’s household, not just the US-born kids. This was set up by Swamp Congress to make sure that hospitals did not go broke from providing so much uncompensated care for the citizens of Mexico.

If you only knew how many American citizens came in there, oftentimes middle-aged self-employed people with very modest income, and were turned down for Medicaid in their own country. Illegal aliens with productive wombs qualify for a lot. Most citizens qualify for none of the freebies: free food, free housing, monthly cash assistance and child tax credit welfare up to $6,444 for maximum womb productivity.

Most low-income [individuals] — whether citizens or noncitizens — are eligible for ZERO beyond [3 months] of food stamps [only] @ $144 per month. They can reapply again 3 years later for another 3 months of EBT only. But churn out kids that you cannot afford via the noble act of sexual intercourse as a citizen or a noncitizen, including those who jumped the border illegally, and it is a different ball game, with many layers of pay-per-birth freebies.

The Venezuelan girl was not arrogant. She actually cried when submitting her proof of expenses and income. Paycheck stubs with a female name were rare with immigrant applicants. The illegal aliens and most legal immigrants usually (always when I worked there) submitted their children’s father’s paycheck stubs.

The Venezuelan girl had not done her part to reproduce for the motherland.....well for someone else’s motherland.

Knowing that she had zero chance of getting the food assistance as a individual with zero birth-canal exits who was slightly above the earned-income limit [because] she worked harder than the recipients, I felt sorry for her, especially when she said she came alone. She had no family to help her.

Who knows whether or not it was true, but most of the immigrant mommas who receive on average $450 per month in free food split expenses in multi-family dwellings, with several womb-productive females bringing in cash from the US government, including billions per year in lump-sum child tax credits up to $6,444.

If that Venezuelan girl had to cover rent and all other bills on earned-only income from one of America’s many low-wage jobs — as it appeared — she was in a terrible situation, like millions of American citizens who lack access to the multi-layered wage supplements from taxpayers and the US Treasury Department for sex and reproduction.

In reply to by Harry Dong

I am Groot 83_vf_1100_c Wed, 12/27/2017 - 02:53 Permalink

Great question ! One day Maduro was all like " I'm dropping the US dollar and switching to the Yuan and Rubles." Not a peep outta Mr Uber since he said that. Let this be ANOTHER example in a very long line of bad ones to you fucktard liberals screaming for socialism.My favorite part is when these brain dead half wits on here start blaming the US for sanctions. As if sanctions had anything at all to do with this dumpster fire, cluster fuck they are in. The US didn't make the price of oil drop from over $100 a barrel to less than $50. And sanctions had nothing to do with the entire economy riding on oil when it fucking collapsed like a house of cards in a hurricane either. Kind of like playing blackjack, you have 20 in your hand and asking for another car. Stooopid.How about a very strong U.S. dollar, OPEC, major oversupply, declining demand and the Iran nuclear deal you dummies.

In reply to by 83_vf_1100_c

bshirley1968 I am Groot Wed, 12/27/2017 - 08:45 Permalink

I'll be your brain dead, half wit.......Imagine Venezuela was a sealed economy with no outside currencies available,  do you think the scenario would look different than now?  It absolutely would as there would be no alternative called the "world's reserve currency" to use as a measuring stick against the local currency. Now dumbass, pay close attention.  The "measuring stick" is not fixed like a 12 inch ruler but is fluctuated by the money changers in NY based on whether they like you or not.Venezuela only needs dollars for international trade.  When NY decides you can't have dollars,  your international trade prospects go to shit......no matter what your economy is called.Socialism is the problem?  Because every nation on the planet right now is not a socialistic sack of shit.......including the US.  China isn't socialistic?   Germany?  France?  Japan?You need to wake up dipshit.  Capitalism,  socialism,  communism, whatever......as long as you can get ENOUGH of the world's RESERVE CURRENCY, there are no problems.Be sure and write in the day the dollar loses "reserve" status.  Your education will be completed then.

In reply to by I am Groot

I am Groot Wed, 12/27/2017 - 02:42 Permalink

You would think cat food would be the new currency there, but considering that they probably ate all of the cats last week, that currency is shit outta luck.

I am Groot Wed, 12/27/2017 - 03:04 Permalink

It makes me sad to think of all the superhot babes possibly having to eat each other if and when cannabalism takes root there. Venezuela has some of the most beutiful women in th world. They have won an aweful lot of Mis Universe contests and they are always in the top 10. On the flip side, I'll bet I could make a fortune with an investment in steak sauce there pretty soon.

spheres777 Wed, 12/27/2017 - 03:11 Permalink

Venezuela and BTC ...really.    I am unable to acquire a coinbase account without virtual sheild. Complete nonsence.... why does zerohedge push this narrative .... (2nd article) . No mention in either article of gold or silver being helpfull. .......also they must be completely done...stick a fork in em...... if they want jewnited states dollars

Automatic Choke Wed, 12/27/2017 - 03:18 Permalink

but but but..... it is a worker's paradise!    the proletariat march forth shoulder to shoulder into the future!   how can you say such horrible things, it is obvious that as a socialist utopia, all comrades of Venezuela live in idyllic communal spirit.   they cannot be hungry, they feed each other the fruit of their toil!!!  comrade marx and comrade lenin and comrade chavez and comrade maduro told us so.   only the capitalist pigs are suffering.   please correct this article immediately, as it cannot possibly be true!!!! 

RevIdahoSpud3 Wed, 12/27/2017 - 03:20 Permalink

At the end of the day, the point of having a functional currency is to be able to trade it for tangible goods. Tangible goods would be anything from tires, baby formula, knives, guns, powdered milk, rubber bands...anything useful to living.Stockpile tangible goods! Goods with a short lifespan such as toothpaste, toilet paper, vodka, cigarettes, candles, canned food vs medium lifespan such as tires, medical supplies (alcohol/band-aids), boots vs long lifespan items such as guns, stoves, tools. Short lifespan items may have more demand and be worth more. Why focus on the medium of exchange when the tangible items are the end result?

rtb61 Wed, 12/27/2017 - 06:26 Permalink

Here's betting an alternate currency https://en.wikipedia.org/wiki/Renminbi, might as well they will be spending on that countries goods and problem solved besides China gets to stick it to the collapse Venezuala plans, just supply spendable currency and as a front end spend on oil. Displacing dollars with Renminbi will work fine and in the long term probably the safer currency bet.Venezuala could simply swap the Rial for the Renminbi and thus get it launched in South America, flowing around the entire continent displacing the US dollar, so big win for Venezuala and China. When Trump spoke of winner take all and the winner must be the USA, the government of China spoke of win win solutions being more desirable, not so much for the US but certainly for Venezuala and China.

indygo55 Wed, 12/27/2017 - 06:58 Permalink

Mexico used silver coins for a long time. Why don't they even mention that prospect that silver coins would be way better then the situation they have now? Why I ask?

youngman Wed, 12/27/2017 - 07:27 Permalink

I went to that article in the post...wow....the black market rate is quite a spread from the offical rate...I assume you just cant take your Bolivars into any bank and exchange them for dollars....then go back on the street and get the black market rate....wash and repeat.....they have a few pictures of the next Maduros....dressed all in Commie red and looking military....some head of some district.....the show will go in even if Maduro is gone....they have the power now..and the food what little there is goes to the army first...