Journey to the dollarization of the Venezuelan economy

In Venezuela, buses have become “exchange houses” on wheels due to the lack of cash in the country. With a dollar in hand, the people of Caracas line up to get on the bus. The driver collects and delivers in exchange a wad of eroded Venezuelan banknotes, which seem doomed to become extinct. Transportation is the only sector that still uses bolivars in cash on a daily basis.

A wad of bills doomed to go extinct

“We are the only commercial establishment, let’s call it that, that we have cash, because banks do not have the capacity to deliver cash to users, so we have become exchange houses,” explains Marcelo Moret, bus driver.

An urban bus ticket costs 150,000 bolivars. Given the difficulties in finding cash, carriers pay for the dollar about 30% less than what the official quotations mark.

“Due to the amount of dollars that reach us, we have to pay it below the page (price established by the market) because they totally take away the little cash that falls to us.”

In the absence of cash, bartering is practiced

Some passengers barter, they pay with a kilo of rice and the driver gives them the difference. It is one more symptom of the agony of cash in the South American country, where the highest denomination bill, 50,000 bolívares, is equivalent to just three cents on the dollar. With what you no longer buy anything. A value dissolved by hyperinflation and the constant depreciation of the local currency.

Devalued currency

The bolivar has depreciated 38% so far in 2021 alone, after losing more than 95% of its value in 2020.

The Venezuelan economy accumulates seven consecutive years of recession. Venezuelans have taken refuge in the dollar, as well as in the Colombian peso and the Brazilian real in border areas.

Digitization to buy bread

As this informal dollarization progresses, President Nicolás Maduro described as an “escape valve” the fact that businesses have been forced to use exclusively electronic mechanisms to collect in bolivars, even for small operations such as buying a simple loaf of bread.

Maduro, who promotes the “total digitization” of payments in Venezuela, promised carriers magnetic card systems that pass through a reader for payments; but that option is far from being massive.

The social gap and the excluded from the dollar

65.9% of commercial transactions in Venezuela are made in dollars, but half of the population does not have regular access to the dollar. The phenomenon opens social gaps. And many are excluded. Four out of five Venezuelans do not have enough income to cover their diet, according to a recent study conducted by the country’s leading universities.