Friday, January 22

The Chavista liberalization of Venezuela | International


A group of passengers waits at a public transport stop in Caracas on December 30.
A group of passengers waits at a public transport stop in Caracas on December 30.Rayner Peña / EFE

Daily life in Venezuela is dominated by dollars, no matter how hard the Government of Caracas is in opposition to that of Washington. Its penetration into all layers of society means that it has no turning back and its use, which is not new, has now even received the blessing of Nicolás Maduro. It is not the only paradox of a regime that defines itself as socialist and revolutionary. The Government is now seeking a new opening to investors, through the so-called Anti-Blockade Law, a legal instrument designed to circumvent international sanctions, which facilitates company investments, for which it expands the powers of the President and the Executive. The rule, criticized by businessmen and opponents, contributes to a kind of wild west of the Venezuelan economy.

“We have the Anti-Blockade Law, there is the new National Assembly that is going to develop a set of laws to make investment in Venezuelan economic activity more flexible, Venezuela is open to the world for investment,” Maduro stressed in an interview broadcast on television. “Thanks to the Anti-Blockade Law, spectacular progress has already been made in new alliances in various fields of investment in the economy… I cannot say much, it is the characteristic of the Anti-Blockade Law, to do without saying, and to say when it has already been done. ”.

In a country with an economy decimated by hyperinflation of the bolivar, the local currency, and a permanent economic crisis, the relief produced by the circulation of dollars is both a mirage and a paradox. It is an optical illusion because for years the transactions have taken place in the field of informality, in legal limbo. And it is a contradiction because the greenbacks arrive without any type of regulation or agreements with Washington, the main adversary of the Chavista regime.

On the last day of 2020, the roundabout that leads to the Petare neighborhood in Caracas was not the usual buzz. Despite the government easing restrictions due to the pandemic, in one of the largest popular commercial areas in Latin America, Osmel León had to hunt down clients. Many stopped in front of his stall to ask the price of vegetables. “Dollarization brought one down,” says the 43-year-old trader. Its little story is that of the country’s economic crisis. For 15 years he kept a perfumery, but “when cash started to run low, I couldn’t continue. I had no point of sale and people no longer had to pay for those things, ”he says. A year ago he had to convert his business to survive. But to pay for a bunch of coriander, not all the bills that a citizen can withdraw from banks on a daily basis are not enough.

The last three years of hyperinflation have swallowed up the bolivar and made way for dollars, which are the banknotes that are now seen the most on the streets of a country where for 15 years it has been illegal to carry out foreign currency transactions outside the control of the Government. León managed to sell a kilo of onions and three peppers that they paid him with a five dollar bill and he was able to give a one dollar bill as change. “The dollar bills they give me I keep, because if I don’t have a return I lose a customer,” he says.

Informal dollarization has created two social classes in an economy that today is only a quarter of what it was less than a decade ago. There are those who can have income in that currency and those who cannot, and that makes the difference between being able to survive and sinking into poverty. Trades such as bricklayer or domestic worker receive income in dollars in many cases and their wages are valued in dollars. For a day of cleaning you pay between five and 20 dollars. A worker’s weekly shift is equivalent to $ 20. The extensive payroll of the public administration, to which the pensioners – some five million Venezuelans – are added, receives their payments in bolivars and the minimum wage is barely around one dollar. The Ecoanalítica consulting firm recalls that at the end of December a kilo of imported grapes cost 10 million bolivars, with an annual increase of almost 4,000%.

The de facto dollarization, which the Government has stimulated with the gradual lifting of controls on the economy in the search for income in the face of the collapse of the oil industry and the siege of sanctions in Washington, has also complicated the already impossible daily finances of the Venezuelans. Although foreign currency has taken over up to 60% of the economy, according to analysts’ calculations, there is no way to access it except through this informal circulation. There are not enough coins for change, not enough small denomination bills.

In this context, in recent months a new figure has emerged in the underground Venezuelan economy. For a 2% commission, for example, a kind of broker (intermediary) transfers $ 30,000 in cash from one of his clients to an account abroad. Then, the cash you receive allows you to continue operating in the parallel foreign exchange market and to serve other traders who want to do the operation in reverse, operating as a bank without a license. Thus, the phenomenon widens the social gap in a country split in two that, on paper, has a “revolutionary” government.

Maduro: “Dollarization and the revolution complement each other”

The Venezuelan president, Nicolás Maduro, acknowledged this week that “the dollar has functioned as an escape valve for income, for trade and for meeting the needs of important sectors of Venezuelan economic life.” However, in an interview with journalist Ignacio Ramonet broadcast on January 1 on state television, Hugo Chávez’s successor maintains that it is not possible to speak of a dollarization of the entire economy. “We cannot say that Venezuela is like Panama or Ecuador,” he said. He also denied the paradox of the use of the US currency. “Is there a contradiction between dollarization and revolution? As far as we go, no. There is complementation, ”said the Chavista leader. Meanwhile, and in the face of competition from the shadow economy, formal banking in Venezuela has also begun to offer custody services for dollars and some entities with branches in Panama have enabled payment instruments in foreign currency for their clients.

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