Venezuela cur­rency crum­bles at dizzy­ing speed

Bo­li­var plunge leaves cit­i­zens des­ti­tute and des­per­ate

Kuwait Times - - BUSINESS -

CARA­CAS: Venezuela’s money, the bo­li­var, is sink­ing faster and faster un­der an in­ten­si­fy­ing po­lit­i­cal and eco­nomic cri­sis that has left cit­i­zens des­ti­tute and in­creas­ingly des­per­ate. Its 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. On Thurs­day alone, the bo­li­var slumped nearly 15 per­cent on the black mar­ket, to be worth 17,000 to one US dol­lar. In a year, the cur­rency has lost 94 per­cent.

The de­cline has been dizzy­ing-yet largely ig­nored by the gov­ern­ment, which uses an of­fi­cial rate fixed weekly that is cur­rently 2,870 to the dol­lar. Or­di­nary Venezue­lans, how­ever, 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.

Salaries dec­i­mated

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. “Peo­ple are pro­tect­ing the lit­tle they have left,” an eco­nom­ics ex­pert, As­drubal Oliv­eros of the Ecoana­lit­ica firm, said. But 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 oil­ex­ports 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.

Maduro 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 the pres­i­dent, 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. On Thurs­day, Maduro promised “spec­u­la­tors” set­ting their prices in line with “the ter­ror­ist crim­i­nal dol­lar in Mi­ami” would go to jail. For the past four months, Maduro has been the tar­get of protests which have been force­fully con­fronted by se­cu­rity units, re­sult­ing in a toll of more than 125 deaths. The op­po­si­tion says the new Con­stituent As­sem­bly is an ef­fort to cre­ate a “dic­ta­tor­ship” along the lines of Com­mu­nist Cuba.

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. The hori­zon is dark­ened fur­ther with big debt re­pay­ments Venezuela has to make, for in­stance $3.4 bil­lion the state oil com­pany PDVSA has to re­im­burse in Oc­to­ber. That debt is de­nom­i­nated in dol­lars.

—AP

CARA­CAS: Venezue­lan Bo­li­var­ian Na­tional Guard of­fi­cers stand guard out­side of chief prose­cu­tor’s of­fice in Cara­cas, Venezuela yes­ter­day. Venezuela’s cur­rency, the bo­li­var, is sink­ing faster and faster un­der an in­ten­si­fy­ing po­lit­i­cal and eco­nomic cri­sis that has left cit­i­zens des­ti­tute and in­creas­ingly des­per­ate.

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