As Venezuela’s embattled government continues its downward spiral, hyperinflation is soaring. And now, not even the U.S. dollar is immune.
Once a prosperous country, Venezuela is suffering from the collapse of its economy amid corruption, fractured socialist policies, devaluation and governmental incompetence. And though global poverty is on the decline, domestically, Venezuelans are struggling.
Then there is the continuing standoff between Nicolás Maduro– who remained in power following an election scrutinized as fatally flawed– and the National Assembly leader, Juan Guaidó, acknowledged by the United States, among others, as the true president.
Run-away inflation moving above 2 million percent per year in Venezuela has made the nation’s state currency, the bolivar, virtually worthless. For those without electronic payment cards, foreign currency has actually become the only useful method of trade within the South American country.
The financial meltdown in Venezuela has shattered the U.S. dollar strength in domestic markets, however. Inflation rates ended up being so fierce that it is difficult to live comfortably with what was once enough to live lavishly.
While Venezuelans await a political outcome, rates are increasing at a daily rate of 3.5 percent. The bolívar has ended up being so useless that the U.S. dollar sets the guidelines for the economy.
Even the dollar is not immune to hyperinflation
Throughout a blackout that left much of Venezuela without electricity last week, the couple of bakeshops, dining establishments, and pharmacies that remained open required cash since electronic payment systems were down. For the vast major of people, that implied foreign currency.
Considering that Venezuelan President Nicolas Maduro legalized the use of foreign currencies last year, the U.S. dollar has increasingly become the norm in numerous aspects of life.
A third of the 30 million Venezuelans are earning and dealing with U.S. dollars daily, estimates Ecoanalítica, a Caracas-based consulting firm. Many thousands of Venezuelans have pinned their hopes on the American currency, attempting to make revenues in USD or receiving remittances from relatives living abroad.
In border locations and towns, doctors, merchants, and even plumbing professionals need payment in Colombian, Brazilian, U.S. or European currency.
Much of the foreign currency in Venezuela comes from the more than three million individuals who have moved since 2015, according to the United Nations.
However, as basic goods become scarcer, even those able to pay in dollars are finding that inflation is soaring.
In the western city of Maracaibo – the second-largest in Venezuela – shops that stayed open only accepted payments in U.S. dollars – 5-dollar costs and above.
And according to estimates by local company Ecoanalitica, a load of essential products that would have cost $100 a year back would now need $675 to buy even in U.S. currency.
Those without good friends and family members outside the nation are hit hardest by the out-of-control hyperinflation in the country. The base pay in Venezuela of 18,000 bolivars is equivalent to less than six dollars per month.