In the first two business days of 2020, Venezuelans have seen how their currency, the bolivar, depreciated against the dollar by more than 23% in the parallel market, a trend that has marked in recent years a country mired in a Deep economic crisis
On the last working day of 2019, the bolivar was trading at 56,122.06 bolivars per dollar, while this Friday it climbed to 73,321.90 bolivars per dollar, according to the Monitor Dollar Venezuela portal, which takes the averages of numerous exchange houses and that is used as a reference in the country.
As a consequence, Venezuelans have almost forgotten their national currency whose value is little less than symbolic and in which saving is almost a chimera to get into the arms of the dollar.
These are some keys on the depreciation of the bolivar:
1. EXCESS LIQUIDITY
Although throughout 2019 the bolivar depreciated constantly compared to the US currency, in the last quarter the process accelerated due to an increase in liquidity in the Venezuelan economy thanks to the increase in public spending in that period.
The economist and university professor Hermes Pérez told Efe that the inorganic issuance, that is, without any kind of support, of money from the Central Bank (BCV) is the reason behind the behavior of the exchange market, the loss of the purchasing power of the bolivar and the hyperinflation.
Liquidity in the Caribbean country jumped from 17,400 million bolivars last October 18, 39.7 billion for December 20, more than double in just two months.
On the other hand, the economist and opposition deputy José Guerra indicated in his Twitter account that the "so aggressive" depreciation of the bolivar "is not generated overnight", but is the result of "fiscal and monetary imbalances that accumulate and then they explode in the form of currency depreciation. "
2. CURRENCY WITHOUT VALUE
The Venezuelan currency has lost value in the last 20 years, while the country has suffered the contraction of its economy and an inflationary process that in 2018 became hyperinflation.
The bolivar has gone through two processes of monetary reconversion, so in 2008 it lost three zeros and became known as a strong bolivar, while in mid-2018 they subtracted another five zeros with what was renamed as sovereign bolivar.
Despite this, the purchase capacity of the Venezuelan currency continues to decline.
3. DOLARIZATION OF FACT
Since 2018, the Government of Nicolás Maduro began the dismantling of the exchange control established in 2003 by the late President Hugo Chávez.
In 2019, a de facto transactional dollarization process took place under the blind eye of the Venezuelan authorities.
Thus, in the Caribbean country, the dollar is practically the only currency seen in the streets and although some shops still show their prices in bolivars they adjust them daily as the national currency is devalued.
4. BLESSING TO THE PARALLEL MARKET
In addition to the official rate offered by the Central Bank, since the exchange control was imposed, a parallel market emerged in which various actors set the price on a daily basis, a value that is usually above that set by the issuer.
Until the exchange control eased, the parallel market was considered "criminal dollar" by the Venezuelan authorities.
However, in a sample of pragmatism, the president of Venezuela, Nicolás Maduro, said at the end of last year that dollarization "is an escape valve" that "thank God exists", which gave free way to his use of informal way.
Venezuelans on foot and merchants often use the parallel marker to set prices in their transactions and even as a measure of value.
5. INCOME IN FALL
After the last devaluation of the bolivar, the minimum wage in Venezuela represents just 2.75 dollars, at the official rate this Friday, which is reduced to 2.04 dollars if the average of the parallel is considered.
The bolivar has lost so much value that the highest denomination ticket in the country, 50,000 units, is not enough to pay for a coffee or even a dollar.
6. TEMPORARY SITUATION?
The economist of the Ecoanalítica firm Asdrúbal Oliveros warned in his Twitter account that the price in the parallel market "has overreacted" due to "the pressure of demand" -originated by the greater liquidity in the economy- and "an offer of dollars very go down for the Christmas holiday. "
In this regard, he considered that next week it will be important to monitor the behavior of the exchange rate in the second week of January when "regular bidders begin to appear."
Norberto J. Méndez