Venezuela: Surviving in the Country with the Worst Hyperinflation in History
The Venezuelan people are going to extreme lengths to deal with Venezuela's current hyperinflation.
How do you survive in a country where inflation can reach 1,000,000%? That is the current situation in Venezuela, the country with the largest oil reserves on the planet, but which became one of the poorest in the world thanks to the arrival of socialism.
The International Monetary Fund (IMF) was forced to revise its estimate of the Venezuelan economy. Although at the end of 2017 it indicated that the country governed by Nicolas Maduro would reach an inflation level of 13,000%, this week it warned that inflation will hit 1,000,000%.
The Venezuelan economy is so fundamentally broken that a family of four needs at least 220 monthly minimum wages to survive.
El FMI proyecta una inflación del 1.000.000% este año en Venezuela… ¡un millón por ciento!
Mientras tanto el enajenado mental sigue imprimiendo billetes de Monopoly sin respaldo.
El fin es acabar con lo que queda de país. pic.twitter.com/JVAPVm0lbm
— Mónica Corrales (@monicacorrales) July 24, 2018
In Venezuela, the minimum monthly wage is USD $1; however, one kilo of white cheese costs 6,400,000 bolivares (USD $1.80), that is, more than one minimum monthly salary.
A decade ago, when the economic decline began, many economists argued that Venezuela could experience hyperinflation thanks to its oil wealth. However, thanks to socialism mismanagement, they not only destroyed the economy, but production of crude oil as well.
The Venezuelan economist, José Toro Hardy, explained to the PanAm Post that with the new estimate of the IMF, Venezuela is among the highest inflation cases that humanity has known in its entire history.
He noted that the economic crisis in Venezuela is due to “aberrant public policies” full of price controls.
This is the result of nonsensical public policy, and unrestrained populism. The government of Venezuela has incurred an unmanageable fiscal deficit to finance the cash flow of PDVSA, which is the state-controlled oil company.
“The government has resorted to demanding from the Central Bank of Venezuela that they issue vasts quantities of money without necessary backing; that money is incorporated into the country’s money supply and results in a demand for goods. But as in the country there are no goods because they have destroyed the country’s productive capacity through expropriations, price controls, through all kinds of socialist measures: what they have achieved is that there is a shortage of everything. In Venezuela there are no medicines, there is no food, but the result is that there is this huge money supply, seeking to buy goods that do not exist, thus the key result is that prices go up,” he explained.
Currently, 91% of Venezuelan families live below the poverty line, and 65% of families face extreme poverty.
“It is very difficult to live in these conditions, first because the country has become impoverished, because there is no salary adjustment that can withstand this increase in prices, and that adds to the scarcity of almost any product. People are getting desperate and living in terrible anguish and for that reason many Venezuelans simply choose to leave the country,” notes Hardy Toro.
Before, the main reason why Venezuelans were emigrated was due to the insecurity and the high levels of violence in the South American country; now the main reason is because the Venezuelan economy is unsustainable.
How do the Venezuelans who stay survive?
Although the economy in Venezuela is not dollarized, because salaries are reflected in bolivars, Venezuelan citizens understand that in order to survive, they need dollars. Any economic transactions involving dollars are a realm of the black market.
Andres Gomez is an instructor in a gym, and is the head of a family with three members. Although he earns a salary in bolivars, he decided to sell slimming products in dollars in order to survive. “If I do not sell them, we do not eat,” he told the PanAm Post.
Guadalupe Jimenez told PanAm Post that she “survives in Venezuela” because she manages to wake up at dawn to go to the supermarkets and buy the products there at regulated prices.
“After several weeks going to the markets I have managed to gather several packages of flour, bread, pasta, rice, and oil. Although I wasn’t able to get the regulated products every time, I learned to go where I know they can be bought more affordably. In Venezuela you do not eat what you want, but what you can get your hands on, when you max out your credit cards,” she said.
Jimenez added that she also has children abroad who are able to send money home to Venezuela, and her husband is able to find paid work from time to time. She pointed out that “all of our income right now goes towards food.”
“Add to that that there is never water, cleaning products, household essentials, it is impossible to pay for them; the houses will now be seen as we see the videos of Cuba; they will be very large hollowed out shells, dilapidated, and impossible to maintain,” she concluded.
This is the current reality in Venezuela, where the priority is to live and work to eat, while millions decide to leave in order to help those who remain.
Like Cubans, Venezuelans also live off of remittances
For the Venezuelans who go abroad, there are many professionals who, by necessity and in search of improving their lives, work as innkeepers or sell sweets on buses; others walk the streets selling Venezuelan arepas. They are united by one mission: to help those who remain in Venezuela. Today, these exiles and their remittances are the “lifeline” for their relatives in Venezuela.
The Venezuelan government currently maintains a vice-like grip on foreign exchange: the free circulation of the dollar (a currency accepted worldwide) is not allowed, and since there is no access to this currency, the black market is the only way to acquire dollars
More and more families are receiving money from a relative or partner from abroad, which helps to relieve the dire shortage of food and medicine at home.
Estimates from the Ecoanalítica consulting group indicate that so far in 2018, Venezuela has received USD $6 billion in remittances, an amount much higher than the estimated USD $2 billion in 2017.
According to a report from the Havana Consulting Group (THCG), Cubans sent USD $3.4 billion in reittances from the United States in 2016, a figure that grew 2.7% since 2015.
In short, it seems that the Venezuelan diaspora, like the Cuban diaspora, will continue to grow, because of the continuous deterioration of the country.
Venezuelans are constantly seeking new means of survival: buying dollars on the black market or through “digital exchange houses”, buying cryptocurrencies, working as freelancers for employers abroad, or travelling to work and returning to the country with foreign currency.