The adoption of the dollar has been creeping in for months as Venezuela's jaw-dropping inflation meant the use of its bolivar currency is largely restricted to purchases by debit cards or bank transfers
Caracas (AFP) - Venezuela’s President Nicolas Maduro may be fiercely opposed to the “imperialist” United States. But in one regard, a US invasion is already happening: the dollarization of his South American country.
Dollar bills are mixed in with wads of the near-worthless bolivar in markets. Long lines form for an opportunity to buy dollars. Shops offering scant and desperately sought basic items are increasingly demanding dollars as payment.
The adoption of the US currency had been creeping in for months, as Venezuela’s jaw-dropping inflation – projected to be 10 million percent this year, according to the IMF – meant the use of the bolivar was largely restricted to purchases by debit cards or bank transfers.
But with an unprecedented power blackout since last week, electronic transactions were knocked out, and Venezuelans turned to the only option left: the greenback.
“There was no power, and when it did come back, we had connection problems with the card terminals and the banks. People turned up with dollars, and from there you do a deal,” the owner of a Caracas bakery, Martin Xabier, told AFP.
“Everybody is doing that around here,” he explained, indicating his working-class district of Catia in the capital’s west and a line of a dozen people outside his shop.
- Cash is king -
In the more upmarket eastern district of Altamira, another line stood in front of a small grocery store that did business behind a locked security grate.
“We only take cash, people! Bolivares or dollars!” the manager declared.
An old woman started crying. “I don’t have anyone to send me dollars. What can I do?” she said, saying she was there to buy milk for her grandson and the bolivares she had were insufficient.
In a market in the nearby neighborhood of Chacao, the dollar ruled supreme.
“Many people are paying with dollars… We need to take cash only and people don’t have bolivares. Or if they have them they have to bring the banknotes in a wheelbarrow,” said Maria del Carmen Pereira, owner of a half-empty delicatessen.
But Franklin Garcia, who runs a small grocery store in the central La Candelaria neighborhood, said: “We aren’t seeing a lot of people, but they are coming with small banknotes, of $10 or $20.”
He said that, in any case, he had lost a lot of produce because the blackout ruined food kept in his freezer.
- ‘Irreversible’ trend -
As of Wednesday, $1 was worth around 3,000 bolivares, of which the biggest denomination was a 500-bolivar bill equivalent to around 17 US cents.
The average Venezuelan salary has sunk to the equivalent of $6 per month. But much food and basic goods are imported, with a chicken for instance costing $3 or $4 in a Caracas supermarket.
The problem for millions of Venezuelans is they have no access to dollars, which is creating “extreme inequality,” according to Asdrubal Oliveros, head of the economic analysis firm Econanalitica.
Henke Garcia, head of another firm, Econometrica, said: “Dollarization has to do with inflation, that is the fundamental cause. This traumatic episode (the blackout) might have accelerated its uptake with people more apt to receive payments in dollars. The trend is now irreversible.”
- Lines for ice -
Electricity supply was nearly back to normal in Caracas by Wednesday, which meant mostly stable but with some interruption. But in western parts of Venezuela, power was still out.
“Here, everything is sold in dollars: cheese, bananas, bread, cellphone recharges, ice,” said Roxana Pena, a 26-year-old resident in the western oil hub of Maracaibo.
Her city, scene of much looting during the blackout, has witnessed lines of people that stretch for kilometers (miles) to spend $5 to buy blocks of ice needed to preserve fresh food.
“A lot of people don’t have anything to pay with,” sighed an elderly local, Margara Bermudez.
The United Nations estimates there are 3.4 million Venezuelans who have emigrated since the crisis in their country began. Many of them send remittances to relatives who remain, but substantial numbers of Venezuelans have no such financial lifeline.
Maduro “can’t guarantee water or power or medicines,” his opposition rival and self-proclaimed interim president, Juan Guaido, told supporters on Tuesday.
The bolivar “is no longer respectable money, able to buy food,” he said.
Maduro accuses Guaido of involvement in the blackout, imputing it to “cybernetic” and “electromagnetic” attacks by the US, which is one of some 50 countries recognizing the opposition leader.
Experts however believe the energy collapse is the result of mismanagement, corruption and lack of investment under Maduro’s government.