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(Original link: theguardian.com)
As inflation soars, Venezuelans have been forced to find new ways to pay for essentials – when the power supply allows. “B arter” reads a simple sign on Angelica Monasterios’s stall in Cupira, a town on the main road east from Caracas. Her niece painted the sign for her in early February, after spiralling inflation and vanishing reserves of hard cash made it hard to do business.
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“We accept dollars and euros as well,” she said with a grin, sitting beside rows of handmade yucca wafers, the town’s speciality, balls of pure cacao farmed nearby and hand-carved toys.
Venezuela has the world’s largest oil reserves, and was once one of the wealthiest countries in Latin America, but its economy has been ravaged by years of runaway inflation. The devastating blackout that struck last week has pushed it to the verge of collapse.
Venezuela officially entered hyperinflation at the end of 2016, and has now endured one of the longest runs of warp-speed price rises in the world, according to Steve Hanke, a professor of applied economics at Johns Hopkins University and one of the world’s leading experts on the phenomenon.
Hanke has logged 58 historical episodes of hyperinflation around the world , and says Venezuela’s is the fourth longest, though nearer the median for rate of price rises. That does not mean an end is in sight. The longest episode Hanke has recorded, in Nicaragua about three decades ago, lasted nearly five years.
venezuela hyperinflation The cliched image of hyperinflation is of people rushing to the shops with cash in wheelbarrows. In Venezuela, however, while the value of money crashes, so does the ability to get your hands on it.
Bolívar banknotes are increasingly scarce, probably because cash itself is one of the many things Venezuela is struggling to pay for . The government’s mint no longer works, so it gets banknotes from abroad, and manufacturers expect to be paid in something other than the fast-devaluing notes they produce.
There are a few things in Venezuela for which cash is indispensable, such as bus fares and supplies in very remote areas, but for almost everything else people have found a workaround.
Venezuelans are using barter, dollars and – when the power supply allows – online transfers, debit cards and even cryptocurrencies to scrape together what they need to survive. They can sometimes go for weeks without touching banknotes.
venezuela poverty Before the power cut, most people in urban areas relied on online transfers and debit cards to make payments, leaving anyone without a card or internet banking dangerously vulnerable.
Gindel Delgado spent two months excluded from the system, spending all his spare time on Kafkaesque efforts to be able to use money again. He needed a new bank card to access his account, but a shortage of plastic meant his bank refused to issue one.
His salary was paid into his father’s bank account, and the pair sat down every evening to make a list of online transfers to people he owed money to.
“I gave up until I had a week off work,” Delgado said of his long quest to get a new card. He spent that week trekking from branch to branch to find someone who could finally issue him a new card.
All this government talk of American imperialism and now we have to use dollars
Celina Bareto Thursday’s devastating blackout – which still afflicts much of the country – has only accelerated Venezuela’s creeping unofficial dollarisation.
With ATMs and card-readers rendered useless, many hotels and shops now only accept dollars. At a supermarket in the wealthy Chacao district, security guards turned away customers without US currency to pay with.
“All this government talk of American imperialism and now we have to use dollars,” said Celina Bareto, whose daughter was inside buying vegetables with the few dollar bills she had lying around the house.
Others without dollars were not so lucky. “I have some dollars saved at home,” said Trina Cedeño, a publicist looking to buy food for her husband and their toddler. “But I was saving them for emergencies, not to buy groceries.”
One butcher in central Caracas said he now makes up to 10% of his sales in dollars, even though they are not technically legal tender. Much of that is from bulk purchases by Venezuelans abroad supporting family back home, but some is cash.
venezuela GDP Inflation has made it hard to break even, even with dollars. “Sometimes I will buy a kilo of meat at 10,000 bolívars, sell it in the shop for 14,000, then go back to restock and the wholesale cost is 15,000,” he said. “You can’t keep going like that.”
The scale of price increases is a problem even for economists who want to study them, because systems for measuring inflation in a normal economy stop working as costs spiral, Hanke said.
People’s spending priorities shift toward food and other basic necessities as their salaries lose value, so the basket of goods used to calculate...