The latest hardship in Venezuela: a shortage of cash
Juan Artega said he had the money to buy Christmas toys for his 5-year-old daughter. The problem was that the bank would allow him to take out only the equivalent of $4 a day.
On Thursday, for the third straight day, the construction worker spent his lunch hour in east Caracas in line at an ATM.
“I still don’t have what I need,” Artega said after making his withdrawl. “Tomorrow, I’ll be back.”
Add a new hardship to the economic, political and social chaos plaguing Venezuela: a scarcity of cash.
Two Sundays ago, President Nicolas Maduro declared that the 100-bolivar bill, the largest and most common note in circulation, would become obsolete and illegal as tender in a week. He later extended the deadline to Jan. 2.
Maduro said his aim was to frustrate currency speculators in Colombia and Brazil who he claimed had driven down the bolivar’s value. But the effect has been the drying up of cash as 100-bolivar notes — though each worth just over two U.S. pennies — account for about 70% of the total cash value in circulation.
Coming at the busiest shopping season of the year, the cash scarcity has sent frustrated citizens into the streets to protest. Hundreds of stores in nine states were reported looted over the last week, and authorities said that in confrontations with police 233 people were arrested and four were killed.
In the eastern state of Bolivar, 600 businesses in its capital, Ciudad Bolivar, were reported to have been looted.
In the month before Maduro’s decree, the bolivar had lost 80% of its value in most exchange houses. Carrying the equivalent of $20 now means stuffing nearly 1,000 bills into a backpack.
Insisting that Venezuela’s economic chaos is due not to his mismanagement but interference from outside the country, Maduro said the culprits were dark forces waging economic war against him.
“We have to strike back at the mafias,” Maduro told a national TV audience. “We are being made victims of an international sabotage.”
But the president’s order that all Venezuelans return the 100-bolivar bills to banks to be exchanged for new bills later in the month backfired. The new, 500-bolivar bills have yet to appear.
Although merchants are legally required to accept the 100-bolivar notes until Jan. 2, many are refusing to do so because they don’t want to be stuck with bills that could be worthless in a few days.
Although the bolivar recovered some of its value at the exchange houses this week, economists said the decree is ravaging an already frail economy.
The cash shortage could shave up to 1% off the country’s economic output this year, said Francisco Monaldi, a Venezuelan economist at the Baker Institute for Public Policy at Rice University. he said.
“It’s a very costly decision that has had and will continue to have long lasting negative economic and social effects,” he said. “It’s a mix of incompetence, ignorance and ideology that I think has backfired. “
The cash scarcity is the latest in a litany of problems for an economy that will contract this year by as much as 10% after shrinking 6% in 2015.
Much of that drop stems from a sharp decline in the price of oil, exports of which account for more than 90% of the country’s foreign trade.
The government also has spent more on social programs than it collects in taxes, creating budget deficits and fueling inflation that this year will reach 500%.
For many Venezuelans, holiday plans have been scaled back.
“I don’t know how the government has taken such hasty measures without any planning,” said Karim Mendez, a secretary. “This has really affected the tranquility of the people during the holidays.”
She said her bank’s cash machines are simply dispensing 100-bolivar notes. “It makes no sense at all,” she said.
Shopping centers normally noisy and crowded this time of year are eerily quiet and nearly empty.
Retiree Agustin Marin said his daily routine now involves waiting in two lengthy lines: one to get cash out of his ATM, the other to buy food.
“I’ve just spent three hours in line to buy corn flour and rice, and now I’ll go stand in line at the bank to get a little cash,” Marin said outside a food market in east Caracas. “Nothing justifies this disaster that is bankrupting the country. We’re spending the holidays in line. They will not be very joyful.”
Special correspondents Mogollon and Kraul reported from Caracas and Bogota, Colombia, respectively.
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