Venezuela: The country literally running out of cash

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VENEZUELANS already struggling to find food, medicine and other basic necessities have a new shortage to worry about: cash.

Troubling shortfalls of Venezuelan bolivars are forcing many in this distressed South American nation to form long lines outside banks several times a week to withdraw what little cash is available.

Others are resorting to bartering goods and services to skirt cash transactions.

“As if we didn’t have enough problems already,” said Roberto Granadillo, 37, a watchmaker. “Now we can’t even find bills.”

Venezuelan President Nicolas Maduro has blamed the cash crunch on mafias moving bills overseas in an attempt to derail the nation’s economy, though he’s presented only scant evidence to back the claim.

What is certain is that the country’s triple-digit inflation continues to skyrocket, meaning Venezuelans must find larger quantities of the scarce bills to purchase even relatively inexpensive items like bread or a cup of coffee — or turn to electronic transfers from their bank accounts.

The Venezuelan government released new, higher denomination bills in values of 500, 5000 and 20,000 bolivars earlier this year after the currency meltdown left the country’s then-largest note worth around 2 US cents (less than 3 Australian cents) on the black market.

But now even the freshly minted bills, printed in rainbow hues and imported in part from the US, are quickly dwindling in value.

In January, one US dollar was worth 4,578 bolivars on Venezuela’s pervasive black market; by October a US dollar got you 29,170 bolivars, according to DolarToday, a website critical of the government that tracks the black market rate.

Analysts project Venezuela’s inflation could surpass 1000 per cent this year and many Venezuelans worry recently announced sanctions by the Trump administration prohibiting US banks from issuing new credit to the Venezuelan government or its state oil company will deepen the economic crisis.

Venezuela is in the midst of a financial crisis.

Venezuela is in the midst of a financial crisis.Source:Supplied

In September, Venezuelan authorities enacted stricter banking and business regulations in an attempt to stem the tide of bolivar bills. Officials are also considering printing bills in even higher values.

The cash shortage is already being felt in the daily lives of Venezuelans like Granadillo, who said his weekly income has slipped more than 50 per cent as customers use the bills they are able to obtain to purchase food instead of comparative luxuries like a watch repair.

Instead of cash, he has recently begun accepting a new form a payment: a kilo of ham, chicken or beef in exchange for a newly ticking watch. “You have to find a way to eat,” Granadillo said.

At the start of 2017, a 20,000 bolivar bill — the equivalent of about A$7.73 and the largest denomination of Venezuelan currency — could easily purchase five basic food products: rice, coffee, corn flour, sugar and pasta.

Now Jose Guerra, president of the opposition-controlled National Assembly’s Finance Commission, estimates a 20,000-bolivar note only has the purchasing power to obtain just one of those, and half a standard-sized portion of another.

He said the bolivar’s value has crashed 75 per cent between January and August, and banks were limiting the amount of cash they let customers withdraw because the Central Bank was not providing enough bills.

“You need a lot more bills,” Guerra said. “And they aren’t there.”

The escalating cash crunch comes on the heels of four months of political upheaval that left at least 120 people dead in near-daily protests decrying Maduro’s rule. In early August, a new, all-powerful constitutional assembly was installed following a vote boycotted by the opposition. One of the new assembly’s first acts was to declare itself superior to all other branches of government, making the nation’s already weakened legislature an essentially powerless institution.

Jose Gil, director of Venezuelan polling firm Datanalisis, said the cash shortfall carried a “very high price” for Maduro’s government but the opposition had not been able to capitalise on the discontent.

Venezuela’s Central Bank injected 849 million bills in varying denominations into the nation’s economy up until August, three times the amount released over the same time period in 2016 — yet still not enough to keep up with inflation.

It’s not uncommon to see Venezuelans paying for goods with large wads of cash, and authorities have opened investigations into citizens caught hoarding substantial amounts, even if they add up to relatively small dollar values.

In one high-profile probe, prosecutors last month seized 200 million bolivars — the equivalent of about A$10,3000 at the black market rate — from activist Lilian Tintori, the wife of Leopoldo Lopez, the country’s most prominent political prisoner. The cash was found in steel-clad wooden boxes in the back of her car. Tintori claimed the investigation was part of a pattern of persecution against her family and that the cash was needed to pay for emergencies including the hospitalisation of her 100-year-old grandmother.

Venezuelan Banking Superintendent Antonio Morales recently told Union Radio that bolivar notes leaving banking institutions are not being returned, as typically happens when cash shifts from customers to commercial businesses and back to banks.

He said investigators have uncovered evidence that contraband networks are moving paper cash out of Venezuela and into Colombia. Officials recently detained 121 people allegedly involved in currency crimes, though no details on the charges were released.

Morales also blamed some local businesses for hoarding cash. Meanwhile, Venezuelans like Maria Castillo, who works in the kitchen at a public hospital, are struggling to purchase food to sustain their families with the little cash they are able to obtain. The 70-year-old recently waited in an hour- long line at her bank to take out the maximum allowed: 10,000 bolivars — the equivalent of A$3.86.

A day later, she was back in line at the bank.

“I could only buy a package of rice,” Castillo said. “Now I’m waiting in line again for the same amount.”

Ref.: http://www.news.com.au/travel/world-travel/south-america/venezuela-the-country-literally-running-out-of-cash/news-story/01f465fd917563444d56389bd4a14c50

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