If Venezuelans thought their inflation woes couldn’t get any worse, they were wrong. While the regime has failed to report inflation beyond 2014, contravening the law, the Troubled Currencies Project estimates the annual rate at 808 percent, as of July 25.
The figure from Steve Hanke of the libertarian Cato Institute, deduced from the black-market exchange for US dollars, is more than 10 times the official rate of 68.5 percent for 2014. Further, the monthly rate of 20.2 percent pushes the Venezuelan bolívar deathly close to hyperinflation.
One now needs 687 bolívares to buy a single US dollar. In other words, the highest denomination bill available, 100 Bs., is worth a mere 14.6 US cents. This black-market rate comes from DolarToday, an outlet censored by the regime. However, they calculate the going value of the bolívar from the Colombian city of Cúcuta, located on the Venezuelan border.
In the face of constituent need, Chavista officials have resisted printing 500 or 1,000 Bs. notes — perhaps because they do not want to acknowledge the disparity between official numbers and the reality on the ground. For example, the official headline exchange rate of 6.3 Bs. per US dollar, available to the chosen few, overvalues the the bolívar by more than 100 times.
Companies on the domestic market, unable to access foreign currencies because of exchange controls, resort to the black market as an important reference for prices and purchases. Thus, the declining value of the bolívar — once known as the fuerte (strong), after a reprinting in 2008 — inevitably affects the Venezuelan consumer.
— Prof. Steve Hanke (@steve_hanke) July 27, 2015
Boris Ackerman, head of the Economics Department at Simón Bolívar University in Miranda State, told the PanAm Post that due to this rise in the black-market exchange rate, Venezuelan purchasing power is collapsing.
Further, he observes both disappearing product lines and diminishing labor productivity. What is not produced in Venezuela requires foreign currency, and the plummeting value of the bolívar means dramatically more expensive imports of both finished and capital goods.
Economist José Guerra assures that the government has thrown “in the towel in the fight against the black-market dollar,” because none of the instruments it has employed have produced any results. Meanwhile, the country moves towards hyperinflation.
Franco Bastida and Sabrina Martín contributed to this article.
EspañolOn July 2o, after decades of hostilities, Cuba and the United States officially renewed diplomatic relations by reopening embassies in each country's capital. The critiques of this rapprochement have been varied: while some doubt the Cuban government's good will and believe they will continue aiding terrorists and violating human rights, others claim the shift led by President Barack Obama makes the United States look weak before an old enemy. While these may all be valid points, there is another that has been woefully ignored. As 21st-century socialism advanced throughout the continent in the early 2000s, and tensions between Cuba and the United States were at their peak, anti-US sentiment spread across Latin America like wildfire. The Cuban government fed fuel to the fire by pressuring countries that were unwilling to adopt the socialist model by means of espionage and financing terrorist organizations. Many countries eventually succumbed to their influence, but a few resisted. Colombia, Chile, Mexico, and Peru, for example, refused to change their economic policies and defended their democracies and rule of law. In fact, not only did these countries resist, they progressed. By steering clear of failed models, these nations were able to pursue promising projects, such as the Pacific Alliance trade bloc. It should have come as no surprise to US officials that their country was not invited to participate. During the period of 21st-century socialism's greatest expansion, these countries stood their ground, without much help from their supposed allies to the north. Preoccupied with escalations in the Middle East and Eastern Europe, the United States practically abandoned these Latin American countries to fend for themselves. Nevertheless, these countries did not cave to the Chavista pressure backed by Havana. Following years of tremendous indifference, the expectation of support from the United States soon faded away. However, it is one thing to be indifferent, and quite another to be insulting. For those countries that resisted 21st-century socialism, the shift in US diplomatic relations with Cuba is a slap in the face. The US government has chosen to disconnect from reality and even gone so far as to claim that Cuba does not support terrorist organizations. For the Obama administration, renewing diplomatic relations with a bankrupt dictatorship is apparently more important than supporting its supposed allies, who are regularly harassed by the same regime it now embraces. Translated by Vanessa Arita.