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There are more dollars than bolivars in Venezuela today

by Ace Damon
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The US dollar has expanded its dominance in Venezuela, while locals increasingly resort to the US currency, even for the smallest purchases.

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The physical dollar currently accounts for more than half of all retail transactions, and the amount of currency in circulation has increased to $ 2.7 billion, according to data from Caracas-based research firm Ecoanalitica. That is three times the value of all existing bolivars plus the amount of local currency held in checking and savings accounts, the data show.

The dollar has taken hold of the economy after years of devaluation and hyperinflation that have eroded the bolivar's value to just above the nil and amid a scarcity of local currency notes. Rather than bothering to assemble a sufficiently large stack of bolivar banknotes and carry them in bags, it is more practical for Venezuelans to conduct their trade in dollar bills transported to the country as remittances or picked up at bureaux de change in the vicinity. borders with Colombia and Brazil.

Although until recently it was illegal to conduct transactions in the US currency, these restrictions have virtually evaporated in any practical sense. Even dictator Nicolás Maduro, who usually tries his best to control the economy, has accepted the transition, while the country suffers a crippling economic crisis that has caused mass emigration amid rising poverty. Things are so bad and the bolivar so weak that Venezuela has trouble printing enough physical bolivar notes to keep up with the devaluation.

"This process they call dollarization can help the country's recovery, the expansion of the country's productive forces and the economy," Maduro said in an interview last month. "Thank God there is dollarization."

  • Boy at a market stall in El Valle, Venezuelan capital, November 19, 2019
  • Fruit seller awaits customers at market in El Valle, Venezuelan capital, November 19, 2019
  • Woman buys a "hallaca", a typical Venezuelan Christmas dish, with US dollars in Caracas street, November 19, 2019
  • Woman buys a "hallaca", a typical Venezuelan Christmas dish, with US dollars in Caracas street, November 19, 2019
  • Customer holds US dollars that he will use to shop at a store during Black Friday at a shopping mall in Caracas, Venezuela, Nov. 29. Stores in a mall in the Venezuelan capital joined Black Friday for the first time.
  • Street vendor counts dollar bills in Caracas, Venezuela, November 19, 2019

Venezuela's dependence on foreign currency also goes beyond dollars. Amid sanctions that limit the country's access to the global financial system, the state-owned oil company is known to trade in Chinese yuan, and the central bank recently considered using cryptocurrencies such as Bitcoin or Ether.

More recently, the Maduro regime has been stuffing the economy with the euros the government receives from oil and gold sales. New rules require local banks to sell the European currency every week in an effort to reduce pressure on the bolivar. There may be up to 1 billion euros circulating in the economy right now, according to Asdrubal Oliveros, director of Ecoanalitica.

With Bloomberg's local inflation indicator – the Cafe Con Leche Index – reaching an annual rate of 8,900%, the bolivar is unlikely to make a comeback anytime soon. Meanwhile, it will take 40,000 of them to buy a dollar.

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