Since the wheels came off Venezuela’s economy back in 2013, the US financial press has displayed an at times unhealthy preoccupation with the fate of Latin America’s favorite “Socialist Paradise” – once the region’s wealthiest economy.
So it’s hardly surprising that Bloomberg, in an effort to unearth more gritty vignettes about the hardships endured by Venezuelans – particularly those who were once middle class who have now fallen into abject desperation in the streets of Caracas, or elsewhere – is publishing a series of first person essays called “Life in Caracas”.
And in its introductory installment, reporter Andrew Rosati points out one of the most dumbfounding ironies of hyperinflation: The need to pay insane mark-ups to obtain paper cash from grey-market dealers.
Rosati describes setting up a clandestine meeting with his “cash dealer” in language that could be used for a drug buy.
My most recent order arrived by motorcycle, a loaded, black trash bag tossed my way. “This is what’s available,” the courier said gruffly before zooming off. I nodded. There’s no begging in the bolivar business.
What he delivered was cash, 200,000 bolivars of it. I, in turn, wired 400,000 bolivars to his bank account. Why such a huge markup? Because in hyper-inflationary Venezuela, we’re all desperate for paper money, a ridiculously scarce commodity but a necessity, even for someone like me with plenty of credit cards. You need cash for gasoline, to use the metro or park your car in a garage, to buy fried fish on the beach or a cup of coffee on the street.
So this is the question that’s all over Caracas: “You got a guy?” I hear it, in dive bars and at posh dinner parties, and in line at the bank, which, invariably, is out of the desired product.
The guy, of course, is a cash dealer. My phone is filled with a half-dozen numbers. They’re cab drivers and restaurant owners and produce sellers, anyone with a bit of hustle. It’s a booming business. The 100 percent premium I paid that day isn’t unusual.
While conventional wisdom might lead one to believe that ordinary Venezuelans sought to settle transactions digitally, this couldn’t be further from the truth: While bitcoin, monero and other digital currencies have become crucial sources of badly needed foreign capital, most Venezuelan merchants prefer to accept cash for small goods. This is true for restaurants and most food vendors, also.
As Rosati explains, the difficulty of obtaining enough cash before the value of the bolivar further disintegrates isn’t just a headache – in the slums, it makes a desperate situation worse.
For me, it’s just another of the frustrations of living in an imploding economy. Low-denomination bills—anything below 100 bolivars ($0.0005 at the black-market rate)—are often used nowadays for such things as confetti at baseball games. And the government is so broke, it can’t afford to print bigger bills fast enough. It’s a curiosity, this whole mess, almost bordering on a Yogi-ism: Hyperinflation’s rendered paper money so worthless that it’s become incredibly valuable.
The paper chase is most intense in the slums, where many people have no other means of payment. Fixers are everywhere in these neighborhoods, eager to get their hands on all the cash swirling around.
One flipper, Orlando Villarroel, told me he positions himself at a bakery check-out. One by one, he pays for customers’ items with his credit card, giving them a markdown and collecting their banknotes until he’s chased out of the place.
Venezuela, which struggles with the world’s worst hyperinflation, saw annualized inflation accelerate to 4,651%. As Rosati points out, the struggle to obtain enough cash is becoming increasingly more difficult to win. And it’s unlikely the money raised by President Nicolas Maduro’s petro will do anything to soften the blow.