VENEUZUELA'S CURRENCY IN CRISIS Activists protest immigration policy
Venezuela’s currency is worth so little that artisans make purses out of it, reports Jim Wyss, of the Miami Herald.
VENEZUELA’S currency has become virtually worthless, making it more worthwhile to turn its colourful bolivar bills into a purse than to spend them on a purse — or anything else.
So that is what Alvaro Rivera and other artisans in one Colombian town along the Venezuelan border are doing — using the once mighty bolivar as raw material to make handbags, bird sculptures and other curios.
The largest handbag Rivera sells on the streets of Cucuta is painstakingly woven from 1000 individual bills totalling 100,000 bolivares. The value of that cash at money exchange houses in Cucuta is US17c (NZ25c). The bag, on the other hand, sells for $US13.
‘‘The price of the work has nothing to do with how many bills I use,’’ Rivera said.
‘‘What I’m selling is the art.’’ Venezuela’s economic collapse has been so deep that it plays out in ways that defy the imagination. The Central Bank has stopped publishing most economic data, but Venezuela’s Congress says annual inflation hit 24,600% in May.
That is as if your bag of groceries, which cost $US15 a year ago, now costs $US3960. And as prices have soared, wages and the currency have not kept pace.
While goods in dollar terms are cheap in Venezuela, those earning bolivares can no longer afford the basics. To feed a family of five for a month costs 20 times the monthly minimum wage, according to the Centre for Labour Research and Analysis, a Caracasbased nonprofit.
The crisis is forcing millions of people to flee the country, often to neighbouring Colombia, to escape hunger and get their hands on any currency other than the bolivar.
In Cucuta, more than 20,000 Venezuelans cross the border every day, some leaving for good and some just hoping to earn a few pesos.
Anderson Gutierrez, a 45yearold orthopaedist from Caracas, has spent the last three months prowling the international bridge doing odd jobs. On a recent weekday, he was trying to persuade Venezuelan women to sell their hair to
Colombian wigmakers. On a good day, he makes about 50,000 Colombian pesos in commission, or about $US18 — a fortune if he takes it across the river to San Cristobal, Venezuela.
‘‘I go to the other side to sleep,’’ Gutierrez said, explaining that the hotels in Colombia were too expensive.
‘‘But it’s really sad over there. There’s nothing to buy. Finding food to eat can take hours.’’
Scrambling to keep up with the runaway prices, Venezuelan President Nicolas Maduro has increased the minimum wage three times this year alone. Now the basic monthly wage is 1 million bolivares. At the official exchange rate, which few people have access to, that salary is equivalent to $US13. But on the black market, where most people are forced to exchange their money, it is less than $US2.
‘‘Venezuela’s minimum wage won’t even buy you a CocaCola over here,’’ said Andreina Velasquez (33), who has been working as an informal travel agent in Colombia to try to support her child back home.
And while the Government has said it is going to roll out new ‘‘sovereign bolivar’’ bills and create a new price structure to tame hyperinflation, it keeps delaying doing so.
Another mindbending aspect of Venezuela’s crisis is that while bolivar bills are essentially worthless, they are also incredibly hard to find. According to
Bloomberg, the Government no longer has enough money to buy money.
And so most merchants now rely on bank transfers for even the smallest payments.
Velasquez said paper money had become so scarce it was selling at a premium. If you wanted 100,000 bolivares in your hand, for example, you had to transfer 250,000 bolivares to the seller’s account.
The reason the bills are prevalent in Colombia and along the Venezuelan border but harder to find in Venezuela’s interior is a product of market forces. As Venezuelans leave their country, they often exchange their savings in Colombia for pesos, or another currency, to continue their journey.
Merchants along the border then use bolivares to buy Venezuelan toothpaste, mayonnaise, gasoline and other pricecontrolled goods that can be resold at huge markups in Colombia.
Girish Gupta, a former journalist and the founder of Data Drum, a website that collects and analyses economic data from Venezuela and other countries, said the Government’s figures provided clues to the crisis.
While the administration could not afford to print or import physical bills, it was creating electronic money at rates seen nowhere else in the world, he said.
In the past year alone, Venezuela’s monetary base — a combination of all the physical and electronic money in circulation — has increased 6222%, according to Central Bank figures. And over the past three years it has increased a staggering 50,000%. By comparison, the United States’ M2 money supply (a broad measure of money in circulation) increased 3.7% in the past year.
‘‘They are printing so much money, in a metaphorical sense, that of course we’re going to have hyperinflation,’’ Gupta said.
‘‘No other country in the world is printing money like that.’’
Just a few yards from where the artisans were busy working late last month, several hundred Venezuelans had started lining up at 3am to receive transfers at a Western Union office.
Capino Porra, a merchant and retired Venezuelan military official, said he travelled three hours every month, and then waited all day in line, to receive the equivalent of $US400 from relatives in Europe.
At the equivalent of Western Union across the border in Venezuela, that money would be paid at the official rate of 80,000 bolivares to the dollar. That means Porra saves the equivalent of $US347 in the exchangerate differential just by stepping into Colombia.
Opening his wallet, Porra handed out 50 and 20 bolivar bills as gifts to people around him.
Holding up a 100 bolivar note, he said, ‘‘it would make more sense to rip this up and turn it into confetti than to try to use it to buy confetti, which would be more expensive’’.
Rivera, the artisan, said he had been doing good business with his handbags and sculptures.
And he had developed a killer sales pitch: If the bolivar should ever magically regain its value, ‘‘you can take apart the purse and spend it’’.