Friday, October 30, 2015

This is what an Inflation feels like.


                                 Comments due by Nov. 6, 2015
 Pity the bolívar, Venezuela’s currency, named after its independence hero, Simón Bolívar. Even some thieves don’t want it anymore.
When robbers carjacked Pedro Venero, an engineer, he expected they would drive him to his bank to cash his check for a hefty sum in bolívars — the sort of thing that crime-weary Venezuelans have long since gotten used to. But the ruffians, armed with rifles and a hand grenade, were sure he would have a stash of dollars at home and wanted nothing to do with the bolívars in his bank account.
“They told me straight up, ‘Don’t worry about that,’ ” Mr. Venero said. “ ‘Forget about it.’
The eagerness to dump bolívars or avoid them completely shows the extent to which Venezuelans have lost faith in their economy and in the ability of the country’s government to find a way out of the mess.
A year ago, one dollar bought about 100 bolívars on the black market. These days, it often fetches more than 700 bolívars, a sign of how thoroughly domestic confidence in the economy has crashed.
The International Monetary Fund has predicted that inflation in Venezuela will hit 159 percent this year (though President Nicolás Maduro has said it will be half that), and that the economy will shrink 10 percent, the worst projected performance in the world (though there was no estimate for war-torn Syria).
That would be a disastrous drive off the cliff for a country that sits on the world’s largest estimated oil reserves and has long considered itself rich in contrast to many of its neighbors.
But the real story goes beyond numbers, revealed in the absurdities of life in a country where the government has refused for months to release basic economic data like the inflation rate or the gross domestic product.
Even as the country’s income has shrunk with the collapsing price of oil — Venezuela’s only significant export — and the black market for dollars has soared, the government has insisted on keeping the country’s principal exchange rate frozen at 6.3 bolívars to the dollar.
That astonishing disparity makes for a sticker-shock economy in which it can be hard to be sure what anything is really worth, and in which the black-market dollar increasingly dictates prices.
A movie ticket costs about 380 bolívars. Calculated at the government rate, that is $60. At the black-market rate, it is just $0.54. Want a large popcorn and soda with that? Depending on how you calculate it, that is either $1.15 or $128.
The minimum wage is 7,421 bolívars a month. That is either a decent $1,178 a month or a miserable $10.60.
Either way, it does not go far enough. According to the Center for Documentation and Social Analysis of the Venezuelan Federation of Teachers, a month’s worth of food for a family of five cost 50,625 bolívars in August, more than six times the minimum monthly wage and more than three times what it cost in the same month a year earlier.
Dinner for two at one of this city’s better restaurants can cost 30,000 bolívars. That is $42.85 at the black-market rate or $4,762 at the official exchange rate.
Inflation has gotten so bad that auto insurance companies have threatened to issue policies that expire after six months, to minimize the risk from the soaring cost of car parts.
A gallon of white paint cost almost 6,000 bolívars on a recent Tuesday. At the same store on the following Friday, it cost more than 12,000 bolívars.
With crucial legislative elections scheduled in December, the government has begun to make refrigerators, air-conditioners and household electronics available to government workers and the party faithful at rock-bottom prices. One government worker said he had bought a Chinese-made 48-inch plasma television for 11,000 bolívars, or just $15.71 at the black-market exchange rate.
Mr. Maduro blames an “economic war” waged by his enemies, foreign and domestic, for the country’s problems. But most economists say the problems are caused by the fall in oil prices and by the government’s policies, including strict controls on prices and foreign exchange for imports.
A recent filing by the Venezuelan government to the Securities and Exchange Commission in the United States indicated that imports last year were barely half of what they were in 2012. That means fewer products on store shelves, less medicine in hospitals and fewer materials for manufacturers to produce goods here — all leading to widespread shortages and higher prices.
But as the crisis has unfolded, Mr. Maduro has been hesitant to make changes that even top officials say are needed, like raising the price of gasoline, which is so heavily subsidized by the government that it is virtually free to consumers — perhaps because he is fearful of a backlash before the elections.
Meanwhile, things are getting stranger by the day.
Need a new car battery? Bring a pillow, because you will have to sleep overnight in your car outside the battery shop. On a recent night, more than 80 cars were lined up.
Want a new career? Plenty of Venezuelans have quit their jobs to sell basic goods like disposable diapers or corn flour on the black market, tripling or quadrupling their salary in the process.
Need cash? O.K., but not too much. Some A.T.M.s limit withdrawals to the black-market equivalent of about $0.57.
Given the chronic shortages of basic goods, supermarkets and pharmacies often fill long rows of shelves with a single product. One store recently had both sides of an aisle filled with packages of salt. Another did the same thing with vinegar. A pharmacy had row after row of cotton swabs.
But among all the shortages here, one of the most notable is a shortage of paper money, especially the coffee-colored 100-bolívar notes that are the largest in general circulation (black-market value, about $0.14) and feature a portrait of Simón Bolívar.
This shortage is surprising, because the government has been printing money at a phenomenal clip to finance its operations and pay its employees. Central Bank of Venezuela data show that the bills and coins in circulation more than doubled during the 12 months ending in July, which economists say is one of several forces driving inflation.
“You want to understand why there’s a lot of money and there’s no money?” Ruth de Krivoy, a former Central Bank president, asked with a rueful laugh. She said the main problem was that the government had failed to respond to rapidly rising prices by issuing larger-denomination bills, such as a 1,000- or 10,000-bolívar note. So people need many more bills to buy the same goods they bought a year ago.
Also, as people resort to the black market to buy more goods that cannot be found in stores, transactions that could once be made with debit or credit cards are now being made with cash. That creates logistical problems, as banks must move around huge amounts of paper money and A.T.M.s empty out more quickly.
“There is a myth that by printing larger notes, they would acknowledge or validate inflation and higher prices,” Ms. de Krivoy said.
Mr. Maduro is certainly aware of the symbolic impact of issuing larger bills with more zeros — and the inevitable comparison it would strike with his predecessor and mentor, Hugo Chávez, who was president for 14 years. In 2008, Mr. Chávez issued new bills and knocked off three zeros from a currency that had long suffered from devaluation and inflation, renaming it the strong bolívar.
Today, the bolívar is anything but strong.
Different banks have different rules, but most limit individual A.T.M. withdrawals to 2,000 bolívars, or $2.86 at the black-market rate. They also set a daily maximum withdrawal that is generally two or three times that, so customers frequently make multiple withdrawals, one after the next, leading to long lines at the machines.
There are even stricter limits on withdrawals using debit cards from another bank. Some A.T.M.s limit such withdrawals to 400 bolívars, or about $0.57 on the black market, enough to buy a dozen eggs.
The other day, Jaime Bello, an airline mechanic, visited his bank, the government-run Banco del Tesoro, only to find that its three cash machines were out of money. He recalled an earlier visit when he went to withdraw 2,000 bolívars and stood listening to the whirring sound as the machine counted out the bills. To his astonishment, it spit out a great stack of 5-bolívar notes, each worth less than an American penny. He pulled out the stack of 200 bills and then waited while the machine counted out 200 more.
"It's crazy," he said. "We're living a nightmare. There's nothing to buy, and the money isn't worth anything."
The cash crunch extends to people who bypass the A.T.M.s and go to the bank teller.
On a recent Friday, Milton Valverde hefted a black New Balance gym bag stuffed with 2,000 pink 20-bolívar notes, worth a total of about $57 at the black-market rate.
Mr. Valverde, a carpenter, said his boss sent him from bank to bank, with two bodyguards, to fill up the bag by cashing checks from clients — all to make the weekly payroll.
The crisis has also meant opportunity for those willing to stand in long lines to buy cheap government-regulated goods that they can resell on the black market.
"I said to myself, 'I can make more doing this,' and I quit my job at the hair salon," said Geraldine Cassiani, who left her job as a manicurist in February to sell goods on the black market. She said she now earned four to five times what she had before.
On a recent trip to the supermarket, she used contacts in the store to skip the line outside and bought four packages of disposable diapers, even though shoppers were supposed to be limited to two each. She already had a "client" lined up to buy the diapers for almost three times what Ms. Cassiani had paid: a nurse who could not take time off from work to stand in line to buy them.
Mr. Maduro regularly goes on television to denounce black marketeers and to blame them for shortages and high prices. Ms. Cassiani acknowledged that she was sensitive to such criticism.
"Partly, I think that what I'm doing is bad," she said, adding that she did not raise prices as much as some black marketeers. A single mother, she said she had to do what she could to provide for her child.
"Necessity has a dog's face," she said.
María Eugenia Díaz contributed reporting.

15 comments:

Anonymous said...

One thing that caught my attention in this article was the fact that "...5-bolívar notes, [are] worth less than an American penny..." Throughout the article, you get that sense of 'Wow, inflation is pretty crazy here,' especially when there's a lot of comparing the bolívar between the exchange rate and the black market. Anyways, my point is that I didn't really get a solid sense of how bad off things are until I read that line. And the fact that ATMs are going empty because of withdrawals and people carrying thousands of notes in duffel bags reminds me of pictures I've seen and stories I've heard of Germany during that period of time between WWI and WWII, where they suffered from hyper inflation. In order to buy a single loaf of bread in Germany at that time, they'd have to fill a wheelbarrow with money and lug it over to the store with them. From this article, I get the feeling that Venezuela is sort of heading in that direction. It's even mentioned that there's already a limit to how many products you can buy ("...and bought four packages of disposable diapers, even though shoppers were supposed to be limited to two each."). Venezuela is at a tipping point, and if things don't get better soon, they can end up like Germany, or even like Greece.

-Elizabeth Piper Phillips

Anonymous said...

With inflation like this in Venezuela, it promotes much more self interest that destroys a country. Reading this made me picture poor societies that have markets which they rely on to survive day by day. Doing what they can for their families and no one else. Inflation can make a nation become its worst, and this is an example of that.

-Alexander Shields

Heather Kiczek said...

The article puts the issue of inflation in Venezuela into perspective and forces us to look at the reality of it. It talks about how due to the fact that inflation rates are so bad, people are quitting their jobs and just looking to make cash, but not too much so they don't have to put it in a bank. People are making more money by working in the black market than they are in their careers. The money that is accessible through a bank is not worth anything. The black marketers are often blamed for being the reason the economy is so poor, however they are basically trapped, because how else are they supposed tot make and earn a living with the astonishing inflation rates? This is just another example of a poorly run economy in a country, and how that poorly run economy is ruining society as a whole.

Nikolas Fountis said...

When reading this article you can get a better understanding of what inflation can exactly do to an economy. With inflation being a general increase in prices and fall in the purchasing value of money the Venezuelan economy suffers tremendously. This sparks people to selfish or self interested and this creates further problems in the economy. It is hard to get a good perspective of how much the money isn't worth anything but with examples shown in the article such as "5 bolivar" are worth less than an American Penny gives a clear and shocking picture. With the money having less value it does nothing but cause people to have to cash out more just to get something they want and need, giving less worth the the currency. With the continuation of this the economy will never improve or become successful.

Anonymous said...

After reading this article, it shocks me to see how the economy of Venezuela is not doing well due to inflation. When the article first opened up with the story about Pedro Venero being robbed and not carrying about the fact that he might lose most or all of his Bolivars let me know that this article was not going to be good. The fact that the people of Venezuela have given up on their economy is crazy. The article discusses how the country has been affected by the increase in prices tremendously. Some things that occurred are that many people must had to quit their jobs and sell merchandise in order to increase their income, people are limited to buying resources which results in them having to wait in lines for long periods of times, and when withdrawing money they are limited to certain amount to withdraw and may only use the ATM 2-3 times a day. All in all this article is a prime example of a country with a poorly run economy who has not made much improvements to fix it.
-Surina Sandhu

David Bavagnoli said...

The people of Venezuela have so little faith in their economy that they make every attempt to avoid the bolivar completely. I can't imagine living in anal country where the value of the currency is so low isn't even attractive to thieves. The idea of families abandoning their current occupations to sell things in the black market is understandable, but if everyone were to do that then the economy would continue to get worse. If people would just think of others rather than just themselves, then less people would enter the black market and more people would invest in the Venezuelan economy making the bolivar worth a little more.

Liam Monarchio said...

The economy in Venezuela is terrible. The people have given up their economy pretty easily. They go on selling things to the black market to make easy money. Since all that money is going to the black market and not to the economy than the economy will steadily be terrible and never be good.

Anonymous said...

Venezuela is in a horrible state as of now. Inflation ruined it completely. The people of Venezuela are investing their time and money into the black market which is even more messing up the economy. People quitting their jobs to sell stuff to heighten their income is scary and stupid me.


Marvin Jean-Baptiste

Anonymous said...

After reading the article, it amazes how inflation is causing Venezuela to have all these problems. People don’t want to keep jobs because they do not want to put their income in banks so they won’t lose money. They have basically given up on their economy and that is sad in a way. Instead of keeping jobs, they choose to sell things on the black market to have quick and easy money.

- Chelsy Ventura

Anonymous said...

High levels of inflation cause people to lose faith in their governments. So when the inflation rate in Venezuela is over 150%, the citizens have no trust in their economy or government. Therefore, people stop doing things legally and start going to black markets in order to get goods for cheaper prices. If you go by the book, prices for inferior goods are five times the minimum wage. That is unlivable. How are people supposed to survive when they get paid 1/5 of what it takes to naturally survive? If the government doesn't use any economic policies, they will not be able to lower the inflation rate. Therefore people will start to move away or live a life of crime and negligence. If the inflation rate continues to soar, there is possibility that the economy can collapse and that can cause a dictator to take over or some other problems.

-Nick Arciszewski

Anonymous said...

Due to inflation, a general increase in prices and the fall in the purchasing value of money, Venezuela’s economy is suffering. The people of Venezuela have given up on their economy due to the horrible state the economy is in. Families have deserted their occupations to sell items in the black market to make easy money. This is only making the economy worse. More money goes into the black market rather than the economy. If more people would invest in the Venezuelan economy, the bolivar will be worth more. However, if there is no change in the way these people choose to spend their money, the economy will never improve.

-Jane Kasparian

prince Unaegbu said...

This article talks about how the economy of Venezuela is not doing well because of inflation. Due to this inflation problem families have quite their job to sell items in the black market to make easy money because their job wasn’t giving them the quick money they needed to support there families. They also talked about Pedro Venero being robbed and how he didn’t care was a flag that something is wrong. This article shows how the people of Venezuela are giving up on there economy, they have no hope for it. All we can do is hope that those people find a solution to fix the economy up.

Anthony Zullo said...

The economy in Venezuela is in shambles at the moment. How can a country that is supposed to be known for its wealth and oil mines have such a big inflation problem? Reasons the economy is in shambles is because at a set price for what people are getting paid by there job that can be the equivalent one week for over $1,000 and other weeks the equivalent of $10! That is absolutely unbelievable yet it putting its people in hard situations to survive and provide for their families. How can they have an inflation rate of over 150%? They refuse to reveal GDP or any types of information along these lines meaning they do not have a solution and do not feel comfortable right now with the economy. I would love to know how this could be resolved and back to being stable.

James McDermott said...

Venezuela's currency is losing value faster than any other in the world. Most Venezuelans now exchange money on the unofficial black market.he process of simply exchanging money is very confusing. Venezuela has four exchange rates: two that the government uses to pay for its imports, the unofficial (black market) rate and a new one the president introduced recently. The latest exchange rate allows Venezuelans to legally buy U.S. dollar for the first time in over a decade. But there's a limit: Venezuelans can only buy $2,000 dollars a month.

Anonymous said...

This article practically talks about infraction and how the people in Venezuela are losing faith in the government. This article is very interesting cause you don't get a sense of what is actually happening in a country like that till you read and information out that people with careers are quitting their jobs to go work in the back market simply because they make more money there then with a career. Venezuela is suppose to be one of the wealthiest country compared to its surrounding neighbors but by reading this and seen how the government is failing to put order in the situation it's clear it's going downhill. Inflation in this country is a big problem that banks atms are running out of money and with money value been so low and nothing to buy people just don't know how much more the government can keep up with this situation. Though the government blames the back market for the collapse in the economy it is clear that people have to do what they have to do in order to survive and wth the government not been much help of course they gotta find other resources. Till the government doesn't step up and fixes the problem the Venezuelan economy will go down hill and will crash.


-Manuel Llivisaca