A Country With An Economy Flushed Down The Toilet

The cost of living is a worry for expats wherever they live but the wheelbarrows of cash needed to buy the basics in Venezuela are mind-boggling.

The government is trying to cope by printing new bank notes that devalue the bolivar by 96%.

The sovereign bolivaris on the presses now, but only knocks a few zeroes off prices and does nothing to tackle the problem.

Inflation is running at 1,000,000% according to the International Monetary Fund and the national minimum wage has just been hiked by 3,000% to $30, although the date when the new rise applies from is far from clear.

Every little helps workers struggling to cope when a toilet roll costs 2.6 million bolivars and the cost has often increased for shoppers between leaving home and arriving at the supermarket.

Black market

At current exchange rates, a million bolivars is worth 30 US cents, which is why a thriving black market is feeding on foreign exchange.

Other hyped prices include a 2.4 kilo chicken selling for 14.6 million bolivars, a kilo of cheese offered for 7.5 million and a kilo of tomatoes fetching 5 million bolivars.

The economy of this once oil-rich nation with the world’s largest proven oil reserves has clattered downhill as the price of oil has tumbled from around $100 to $50 in recent years coupled with misrule and corruption of a socialist government that has controlled the country for more than a decade.

Business owners say dressing the wounds will not solve the problem as pushing up wages means they will have to axe staff to stay competitive.

Cryptocurrency hopes

President Nicolas Maduro is also pegging the sovereign bolivar – which replaces the old bolivar – to the Petro, a hyped cryptocurrency.

Maduro says investors will pile into the Petro as the value is guaranteed by oil assets. He is also increasing the subsidised price of oil and gas to throttle a black market that is selling the cheap products over borders with neighbouring Colombia, where prices are much higher.

Johns Hopkins University economist Steve Hanke wrote on Forbes.

“Appearances change, but nothing changes. That’s what’s in store for the bolivar: a face-lift,” he said.

He could be right. A previous government tried the same move in 2008 and look where Venezuela is now.