Venezuelans Escape Currency Collapse with Bitcoin

By: Belén Marty - @belenmarty - Jun 9, 2015, 1:41 pm

Español“Bitcoin adoption in Venezuela will explode any time now,” one early cryptocurrency adopter in the South American nation confidently predicts. Bitcoin experts argue that the worse an economy is, the more interest there is about the digital currency’s benefits — and Venezuela is a strong candidate for the next bitcoin boom.

Stringent controls on access to foreign currency and runaway inflation — last week saw a sudden jump in the unofficial dollar rate to Bs. 400 per dollar — have led to the number of Venezuela’s bitcoin users doubling since 2014, according to data provided by Bitcoin Venezuela.

“Protect yourself from inflation, change your Cadivi/Internet/Cencoex dollars to bitcoin and join the money revolution in Venezuela.”

A representative from the country’s leading bitcoin advocacy organization, who wished to remain anonymous, told the PanAm Post that they offer Venezuelans the chance to buy the cryptocurrency online and thus escape the ever-increasing devaluation of the national currency.

The Venezuelan government enacted strict controls over foreign currency in February 2003 under late former President Hugo Chávez. Citizens looking to travel abroad or shop online are only allowed a limited amount of dollars (for the latter purpose, the government grants them just US$300 per year).

Bitcoin’s volatility is a well-known obstacle to widespread adoption, a fact recognized by the spokesman for Bitcoin Venezuela, but he argues that “the price never fluctuates at the same rate as the devaluation of the bolívar, which lost 60 percent of its value in one month.” As such, the virtual currency can serve not only to transfer value, as in remittances, but also to store value.

The bitcoiner community in Venezuela, gathered in a Facebook group with almost 4,000 members, speaks to the growing interest in the cryptocurrency. “The SurBitcoin exchange is already the second largest in transaction volume in Latin America after Brazil. The growth is evident,” the bitcoin advocate said.

Instead of viewing the currency as an enemy, the administration of President Nicolás Maduro should see it as an ally, he argued: “Bitcoin removes pressure on the exchange market, as thousands of people and firms need foreign currency.”

A member of the Bitcoin Venezuela Facebook group who goes by the handle “Movi Ve” deplored the “brutal” depreciation of the national currency. Today, “the bolívar is just paper,” he wrote.

Bitcoin usage started around three years ago in Venezuela. Movi Ve explains that he makes enough to live on from transferring bitcoins. He says the cryptocurrency “is a lifeboat for Venezuelans” and is safer and faster than the black market for dollars, in which “scams are everywhere.”

“Bitcoin makes changing bolívares to dollars much easier and quicker,” he argued.

Mounting interest has prompted the community to organize a meet-up next week in an university in Maracaibo, Venezuela’s second-largest city. “I’ll be launching my website with information on bitcoin trading,” Movi Ve added.

According to, a website that tracks persons or businesses accepting bitcoin worldwide, there are 17 establishments in Venezuela that accept the digital currency: eight of which are in the capital, Caracas.

Currency Flight

Venezuelans seek bitcoin to escape the country's inflation
Venezuela’s inflation is among the highest in the world. (El Venezolano)

Venezuelan economist Luis Oliveros explained to the PanAm Post that the supply of foreign currency in Venezuela has plummeted while demand has continued to grow. As a result, Venezuelans “are running” to the black market to find dollars, he says.

The “Cadivi dollars,” Oliveros explains, were the government’s way of easing up on currency controls. “The Venezuelan government had to find a way to give people traveling abroad dollars. So they made the decision of granting Venezuelans an annual travel quota.”

With time, the Cadivi quota became smaller and smaller. Nowadays the figure varies depending on the travel destination and duration.

“The quota has always been fixed at a much lower rate [than the unofficial market]. This created incentives for many people to travel, and play the system,” because “those travelers who buy dollars at the official rate are being subsidized by those who stay.”

Translated by Daniel Duarte.

Belén Marty Belén Marty

Belén Marty is the Libertarian Latina, a journalist based in Buenos Aires, Argentina. She has lived in Guatemala, Jordan, the United Arab Emirates, and the United States and is a former candidate for local office with Argentina's Libertarian Party. Follow @BelenMarty.

Colombia’s Chief Economist Gets It Wrong on Wealth Creation

By: Javier Garay - @Crittiko - Jun 9, 2015, 1:07 pm

EspañolLast week, a private event took place in Bogotá to analyze US-Colombia relations. Instead, however, participants diagnosed Colombia’s economic situation, including threats and challenges going forward, and they didn't paint a pretty picture. Among the principal speakers was Colombia's Finance and Public Lending minister, Mauricio Cárdenas. In his speech, the minister embodied the severe inconsistencies in economic thinking that currently exist in Colombia, and offered an example of why doubts about the country's ability to create wealth in the future are fully justified. In recent years, Colombia has improved her indicators on almost all fronts. This has improved expectations of the future, but it has also generated the desire among many social sectors for a greater role for the state in offering services, providing goods, and even redistributing income. Beware that growth is not the same as development. One cannot assume that just by growing at moderate rates for a few years, a country can consider itself rich. Rather, the conditions that permitted the creation of wealth must be maintained, widened, and protected. In this way, these services and goods that people demand today from the state will, in the future, come in their majority from the market. Moreover, a sustained increase in societal wealth will solve poverty. As a result, redistribution will be made unnecessary. The incentives are very strong for politicians to say and do exactly what the masses want. But voters aren't interested in waiting for "the future." They want to perceive the benefits now, immediately, even if these are spurious, ephemeral, and damaging for years to come. And since politics isn't about trying to persuade the masses to change their immediate passions, nor about thinking of the common good, but rather about being chosen for short-term office, the incentives for politicians to say and do exactly what the masses want are very strong. In the process, there has to be a means of convincing the skeptics — or those affected by politicians' decisions — and in many cases one of self-convincing. Here lies the importance of rhetoric, and this is what predominated in the intervention made by one of Colombia's best economists, Minister Cárdenas. For him, the measures that the government is taking will reduce the negative impact of the fall in oil prices. However, as I and my colleague Julio César Mejía show in a soon-to-be-published study for the Center for Free Initiative, the petroleum crisis is bad for governments, but benefits other economic agents. Thus the government doesn't have to do anything, but it is. And within the actions mentioned by the minister, we can observe five problems of economic thinking. The first: one of contradiction. On the one hand, he spoke a lot about fiscal responsibility. However, on the other, he adopted clearly Keynesian rhetoric, of the most orthodox kind, to justify public spending: the construction of infrastructure. Through an elaborate and polished rhetoric, we'll continue to repeat the same errors of the past. Second, he expressed himself chiefly in euphemisms. The existence of a fiscal rule in Colombia, through which the government has to meet strong deficit reduction targets, is paradoxically used as a license to spend more. The logic is more or less like this: we're fiscally responsible, but we're in crisis, so we can be a little irresponsible. The most interesting thing is that these euphemisms are justified through the third problem: the obsession with experts. A single group of experts, chosen by the minister and his advisors alone, determines when and by how much they can exceed the fiscal rule by. And, beyond their obvious omniscience, how do they take this decision? Via the fourth problem: a slavishness to statistics. The most serious issue is that in this case, these figures aren't even verifiable or real. The experts excuse themselves for disrespecting the fiscal rule when they observe that petroleum prices or the national growth rate are "below their potential level." What precisely is that level? How is it measured? Through econometric models that are designed by … the same experts themselves, or the ministry. All the above brings us to the fifth problem: complacency. Minister Cárdenas told the room that Colombia is a global example of how to confront a crisis. It's such an example that a country like Nigeria, in turn an example of fine practices, policies, and development in particular, wants to copy the Colombian model. These are the problems with which, thanks to elaborate and polished rhetoric, we'll continue to repeat the same errors of the past. And wealth creation will be the only thing affected. All that will remain will be the much-demanded redistribution of the very little that has been created up until now. Translated by Laurie Blair.

Weekly E-Newsletter

Get the latest from PanAm Post direct to your inbox!

We will never share your email with anyone.