The Headache that is Dollarization in Venezuela

Por Caridad

HAVANA TIMES – Up until a couple of years ago, Venezuela was divided into two groups: “Chavistas” and “Escualidos”.  At least that’s how it seemed whenever you opened up a newspaper or watched TV.

Now, in spite of the government insisting on holding onto this idea of political division, the reality is that Venezuela has divided itself again into two groups, but not political ones, economic ones instead: Those who earn their wages in dollars and those who receive their wages in Bolivars.

These are the two real groups in this country where there was a restrictive policy on using the US currency, up until recently.

The DolarToday website has been accused of all kinds of things and demonized by the Venezuelan government and its followers. According to them, this website has the power to control the economy and the dollar exchange rate in Venezuela. That was until we woke up one day to Nicolas Maduro’s voice thanking dollarization and creating a kind of alter-ego of the Cuban CUC: the petro. 

We won’t find anyone at this point in time who can explain what the petro is exactly. The government insists on selling it as a cryptocurrency, but the only thing we can be 100% sure about is that it isn’t a cryptocurrency.

The so-called “petro” is already linked to the dollar. Meanwhile, the price of tax units (taxes and rates) have become linked to the petro, after presidential decree N° 4096 was passed, which makes official “service fees and taxes payable in Petros in state bodies”. 

This means to say that services which form part of Venezuelans’ civil rights, such as SAIME (ID, immigration and foreign services), is charging for its services according to the petro’s (read here: dollar’s) fluctuating rate.

The relationship between the petro and money laundering is clear in my eyes. The petro will also be good for collecting dollars and is the Trojan Horse the government created to (further) weaken the Bolivar, without coming outright and admitting the country is becoming dollarized because that would mean they would have to adjust wages to the dollar.

How does it make any sense that services are being charged in a currency that people aren’t receiving wages in?

The minimum wage is 250,000 bolivars, which is the equivalent of 0.057 petros (just over 3 USD per month).  Nicolas Maduro has already lied, as per normal, when over a year ago he promised to affix the minimum wage to the petro.

Now it’s normal for the dollar to be the currency to guide prices of any product; but its use in everyday life is still random. You can find sellers who welcome you with open arms if you go to buy with green bills; but others still haven’t gotten used to this and find a thousand excuses not to receive them: that it’s creased, has a broken edge, is written on or too old or they don’t have cash to give back in change, quite simply.

Meanwhile, you can find houses in really good condition for scandalously cheap prices: from 1000 USD onwards. Likewise, cars or motorbikes for between 300 and 5000 USD. Which are seemingly cheap for their price in dollars but are practically out of anyone’s pocket in bolivars.

There are two reasons for this: people leaving the country need to sell cars and houses in order to cover their travel expenses, there aren’t a lot of buyers and there’s a lot on the market; and the other is that it is cheaper to buy a car than it is to change a part or keep it in good condition.

The really sad thing is that, ten years ago, you sold a house or car and you could set up a business, do lots of things or just sit back and relax for a good while. Today, the money will be used to buy food or medicine, in a lot less time than it took to earn the money to buy this car in the first place.

As there are no kinds of control on sellers (legal or illegal), everyone charges what they want for whatever it is they are selling. So, this week a product can go on market for 10 USD, but the next week they can charge 5 or 10 USD more (or the equivalent in bolivars). If a year ago, people were blaming the dollar for prices going up in bolivars, today, inflation has also taken over the dollar.