TL;DR: Letters from Venezuela is an exclusive CoinSpice series, an inside look from a reporter on the ground, documenting the South American nation’s last stand among sanctions, political unrest, international condemnation and concern, economic collapse, and the specter of cryptocurrency possibly demonstrating its main use case. In this installment, we explain the new problems Venezuelans face as the government has devalued its currency 25% more, causing prices for basic goods and services to skyrocket, and how crypto continues to be a lifeline for some.
More Spice: Bitcoin White Paper Visualized
Devaluation in Venezuela Rears its Ugly Head
Venezuelans have not had a single easy day since power outages began last month. And while the causes are still officially being investigated (lack of maintenance and imperial attacks), the truth is this has affected heavily the lives of the Venezuelan people. But there are other problems plaguing the country equally or even worse, such as official devaluation policies and the resulting inflation. To explain the devastating impacts, we must explain first why we talk about “official” devaluation.
Venezuela is one of the few countries that still persist in having an monetary exchange controls carried out by the state, meaning the exchange rate for currencies is being dictated by the Central Bank of Venezuela, using that power as a devaluation instrument to gain more bolivares domestically by every dollar obtained. And due to the international economic sanctions the country is going through, every dollar is a precious treasure.
To achieve the purpose of getting more money with the same amount of dollars, the Central Bank of Venezuela has raised the exchange rate (called DICOM) to 5,200 Bolivares, officially devaluing by 27% against the dollar — a measure that will surely create more inflation because most of the products Venezuelans consume are imported or are made with imported materials or goods.
Inflation Also Rising Heavily
Most economists are predicting a rise in prices for food and basic goods that will lead to a dramatic increase in the inflation rate of the country, already bordering upon unthinkable levels. A report from Bloomberg forecasts inflation will reach an eye-popping 8,000,000% during 2019, a reality that will bring more hunger and misery to at least the already poorest people in the country. However alarmist these numbers can sound, there is no counterpart to them: the Venezuelan government stopped offering official numbers since 2016 due to bad publicity.
Only manufactured numbers are being produced, and at the center of it all is the CENDAS (Center of Documentation and Social Analysis of the Venezuelan Teachers Association), an organization that has assumed the task of calculating the price of a typical basket of basic goods. The numbers are disastrous. The latest report from this institution sets up the basic basket at 673 dollars for the month of March, a dramatic increase of 2,724% over the month of February. According to this number, each Venezuelan would have to earn more than 20 dollars daily to maintain a family, an impossible fact considering the monthly minimum wage is only about 4 dollars.
Crypto as a Lifeline
Despite the troubling state of the electrical system, and the falling cryptocurrency trading numbers since its ATH in February, Venezuela still has a raging cryptocurrency economy under the scenes, and each day more and more people are aware of these alternative payment methods that can make a difference as a store of value vs the local currency. The dollar is the undisputable king of the alternative currencies, being accepted even in popular open grocery markets in the same way they are being accepted in countries like Cuba.
But tech-related goods and services dealers often accept cryptocurrencies as a means of payment. The growing Venezuelan diaspora uses crypto as a bridge to send money from outside the country to aid their ailing family members back home. This use of crypto for remittances is also key due to the non-availability of normal channels (like Western Union). The government has made an attempt to regulate this subject, even formulating a cryptocurrency remittance law, but it has been unable to enforce it due to the lack of tech expertise.
CONTINUE THE SPICE and check out our piping hot VIDEOS. Our podcast, The CoinSpice Podcast, has amazing guests. Follow CoinSpice on Twitter. Join our Telegram feed to make sure you never miss a post. Drop some BCH at the merch shop — we’ve got some spicy shirts for men and women. Don’t forget to help spread the word about CoinSpice on social media.