For the third time in 13 years, Venezuela will reduce its inflation-affected currency, the bolivar, to zero on Friday. This time, he will lose six zeros, for a total of 14 since 2008.
With that, a million bolivars will become one overnight – still the equivalent of about 25 cents of US dollars.
Venezuela’s Central Bank announced its decision to streamline transactions last month as consumers scramble to pay for even the most basic goods or services.
Seven million bolivar banknotes – the highest denomination and very hard to come by – are needed to pay cash for a loaf of bread in the once oil-rich country struggling with the highest inflation in the world.
Venezuela’s GDP has fallen 80% since 2013 as the price of oil plummeted and production declined during decades of underinvestment and mismanagement by successive socialist governments.
Teacher Marelys Guerrero, 43, is among the many Venezuelans who receive a salary in millions of bolivars that are worth nothing.
“We earn less than US $ 3 every two weeks,” she told AFP in Caracas.
Rent for an apartment in a modest suburb of the capital starts at around US $ 150, while a basic grocery cart for a family of five costs around US $ 220.
Most bolivar payments are made by debit card or wire transfer, but 70% of transactions are now made in dollars, according to private sector estimates, and prices on many store shelves are displayed in US currency, for simplify things.
“I’ll buy your dollar!” “
On Friday, Venezuela becomes the South American country to have withdrawn the most zeros from its currency. He lost three in 2008 under the now-deceased President Hugo Chávez, whose successor Nicolás Maduro eliminated five more in 2018.
The bolivar is now worth so little that children use it to gamble.
In the border regions of Venezuela, in addition to the dollar, it is common to also pay for goods in Colombian pesos or Brazilian reais, and even in grams of gold.
In the rest of the country, cash is used almost exclusively to purchase public transport tickets, but even this presents a headache as tickets are scarce and can only be obtained by standing in long lines. at the bank.
“I’ll buy your dollar!” – children with thick wads of bolivar banknotes scream on the buses which, along with the bus stops, have become informal exchange offices.
“We pay a dollar for four million bolivars. The trip costs two million,” said William Hernández, a 56-year-old bus driver.
The government will issue new banknotes in denominations of five, 10, 20, 50 and 100 bolivars, as well as a one bolivar coin after the change on Friday.
But the government has also said it wants the economy to go fully digital, a move, experts say, intended to avoid printing money that will only continue to devalue.
“If inflation behaves as it has in recent months, it is very likely that in about three or four years the government will have to reconvert,” Luis Arturo Barcenas of the economic consultancy firm Ecoanalitica told AFP. .
‘It is a relief’
The bolivar has lost almost all of its value in just over a decade, losing almost 73% in 2021 alone.
The country’s annual budget of 115 billion bolivars in 2007 – then the equivalent of 50 billion US dollars – if held in bolivars, would be worth less than a dollar today.
Venezuela is grappling with its eight-year recession as well as hyperinflation that reached nearly 3,000% in 2020 and more than 9,500% the year before, according to central bank figures.
Ecoanalitica expects the number to reach 1,600 by 2021.
In May, the government tripled the minimum monthly wage, but the new amount was not even enough to buy a kilo of meat.
Three in four Venezuelans live in extreme poverty today, according to a university study published Wednesday, the economic collapse having been made worse by the coronavirus pandemic.
Millions of people have left the country in recent years to try their luck elsewhere, but many have found themselves refugees.
While consumers like Guerrero fear the readjustment of Friday’s bolivar will crush their pockets further, with traders rounding up prices, others like Caracas accountant Rodrigo Bermudez are welcoming the change.
“It’s a relief … The number of digits made everything very cumbersome,” he told AFP, showing an invoice with too many zeros to make sense.
by Esteban Rojas & Javier Tovar, AFP