Why Venezuelans Are Carrying Backpacks of Cash on the Streets

Why Venezuelans Are Carrying Backpacks of Cash on the Streets
Ioan Grillo/Caracas @ioangrillo Dec. 3, 2015

Terrible hyperinflation is ruining the country's economy, and could mean
the end of Chavizista socialism in upcoming elections

When Cesar Rodriguez travels across Venezuela on business for an
aluminum company, he likes to carry the equivalent of $200 in cash as
well as his debit card. But since Venezuela now has an inflation rate of
more than 150 percent—the worst in the world—that means taking more than
180,000 bolivars, the local currency, which fills up half of a backpack.
And with the greater fear of getting mugged, he also stashes bills in
his socks and various pants and shirt pockets, in case his bag is taken.
"Just making simple transactions has become a real challenge," says
Rodriguez, 42. "I have bills counted out in bundles of 2,000 or 10,000
bolivars, so I can pull them out quickly without showing all my money."

This hyperinflation has become one of the most visible symbols of the
crumbling economy of this South American nation, ruled since 1999 by the
socialist alliance of the late Hugo Chavez. The currency crisis has
vaporized people's salaries and contributed to chronic shortages of
everything from chicken to toilet paper. The political opposition, which
has come together in the Democratic Unity coalition, has put the economy
at the heart of its campaign for Congressional elections held on Dec. 6.
Recent polls show it ahead by 15 points or more, putting it on a path to
break the rule of the socialists, or Chavistas, in the National Assembly
after 16 years.

The government under Chavez's successor President Nicolas Maduro has
tried to stabilize the currency by enforcing a fixed exchange rate of
6.3 bolivars to the dollar. But they have no way of controlling the
black market, where the price for a dollar has spiraled. This year alone
it has gone from 170 bolivars in January 2015 to more than 900 this
month, a rise of 530 percent. Government efforts to introduce
intermediate exchange rates and jail black marketers have failed to stem
the free fall.

Beyond eating away at the popularity of the government, the
hyperinflation has made basic aspects of life in Venezuela difficult.
Limits on some ATM machines mean that people can only take out the daily
equivalent of $4. Businesses large and small have brought in counting
machines to deal with the thick wads of cash needed for everyday
purchases. Changing $1,000 can buy enough bolivars to fill a suitcase.

Despite regular raises, salaries given out in bolivars have plummeted in
their actual worth. Cristina Ramos, 43, who works for the state-owned
oil company, has watched her wages tumble from the equivalent of $600 a
month in 2012 to about $70 this month. "I thought we could never become
this poor because we were in Venezuela, which is an oil rich country,"
Ramos said. "But now we are living like people in Cuba."

The lack of dollars in the economy makes it difficult to import goods.
Supermarkets ration supplies with checks by fingerprint scans. Shortages
vary—milk one week, butter the next, paper napkins the week after that.
When goods are available, the lines circle around city blocks.

So what happened to the economy of Venezuela, a country that has bigger
oil reserves than wealthy Saudi Arabia. The charismatic Chavez gained
massive popularity by lambasting the inequality that has long haunted
Venezuela and building what he called "21st century socialism." Funded
by sky-high oil prices through much of the 2000s, he raised housing
projects and medical clinics in the slums, initially reducing poverty.
Under his rule, the economy grew and while inflation was high, it was
not off the chart. He also expropriated large chunks of the private
economy, from steel works to dairy farms.

However, Chavez's death in 2013 coincided with a severe drop in oil
prices, robbing Venezuela of the best way to replenish its dollar
reserves. Meanwhile, the unproductive state-owned companies and farms
have failed to produce enough for Venezuela's 30 million people.
President Maduro also blames shortages on what he calls an "economic
war" of black market profiteers and opposition forces trying to
destabilize the country. "Saboteurs. Parasites. That is enough," Maduro
said in a TV address on Tuesday. "They have the products. But they close
the doors so the people wait suffering in the sun."

However, the opposition argue Maduro is passing the blame. "This
economic war is a fantasy," Miguel Veliz, an economist and congressional
candidate told TIME. "The government is in control of the economy so it
is the one to blame. Its chronic mismanagement has given way to the
inflation and shortages. It has devastated the abilities of companies in
Venezuela to produce." And while Maduro is the one holding the bag, even
the opposition says that Chavez left a disaster waiting to happen as
soon as oil prices fell.

If the opposition wins a majority in the National Assembly on Dec. 6 it
will push for immediate measures to try and rescue the currency, Veliz
said, but warned that it could still take time. The opposition have also
said they will look at a recall vote to remove Maduro from the
presidency, long before his term is due to finish in 2019.

The government has promised to respect the results of the legislative
election. However, Maduro has also made confrontational statements in
election events this week, raising fears of a clash if things don't go
his way. "I know we are going to triumph but if there are negative
circumstances, I will go to the streets and fight with the people,"
Maduro said Tuesday "The revolution will go to a new stage." If that
happens, hyperinflation may be the least of Venezuelans' worries.

Source: Why Venezuelans Are Carrying Backpacks of Cash on the Streets |
TIME -
http://time.com/4135247/venezuela-hyperinflation-congressional-elections/