The Venezuelan Economic Chaos - Part 1
According to a report from the Central Bank of Venezuela (BCV), the net international reserves of the Republic, as of September 10, registered a balance of US $ 6.322 million, which reflects a decrease of US $ -103.0 million, compared to the balance for the previous week, which was US $ 6,425 million.
Source
With these critical levels of monetary support, any amount of Bolívares issued by the BCV, whether physically or electronically, only represents inorganic money, which increases circulating liquidity, causing immediate devaluation.
The Venezuelan government, as a populist and demagogic measure, has been implementing for years a system of payment of "Presidential Bonds" to a large part of the population (10 million people approx) through a digital system called "Patria ". These payments are made in national currency.
Since on December 6/2020, a new electoral process will take place in Venezuela, the national government (as a measure of coercion and deception) has increased the delivery of these presidential bonds, which is having a direct impact on the price of the national currency and in counterpart to the price of the dollar, the latter has experienced an increase of more than 60% of its price in 15 days.
The Dollar in Venezuela
The value of the dollar in Venezuela has lagged substantially with respect to the value of actives and services whose prices are established in Bolívares, which allows it to be perceived as "artificially cheap" and thus its price rises, since, As there is a greater amount of bolivars in the financial apparatus, due to the payment of year-end bonds, liquidation of labor liabilities and even the payment of "presidential bonds", there is a considerable increase in the demand for American currency, due to the "momentary" purchasing power.
Since in Venezuela there is a great shortage of dollars, due to the exchange control established by the government for more than 20 years, the supply does not cover the levels of demand, causing an immediate upward effect on the exchange rate.
Many people mistakenly use the term "devaluation of the dollar", but this phenomenon cannot be considered as such since the inflation of this currency occurs because the reference to fix its value is still the Bolivar.
"Prices increase in dollars due to their cost established in Bolívares."
For this reason, currently, it takes twice the amount to be able to buy the same thing that was bought months ago with 1 dollar.
Let's see in concrete examples:
11/15/2020: 1Usd = 540,000.00 Bs
1Kg of Flour had a cost of 0.8USD, that is, 432,000.00 Bs,
1Kg of Meat had a cost of 2.5USD, that is, 1,350,000.00 Bs.
Today (22/11/2020): 1Usd = 870,000.00 Bs
(870,000.00Bs-540,000.00Bs = 330,000.00 ==> 61% increase.)
But nevertheless:
1 Kg of Flour now costs 1.2USD, that is, 1,044,000.00 Bs. (141% increase)
1Kg of Beef now costs 4USD, that is, 3,480,000.00 Bs. (204% increase)
Note: these increases occurred within 15 days. The trend is that the $/Bs exchange rate will continue to increase in the next few hours.
How to Protect Ourself from Devaluation?
For the companies
The accumulation of inventory, raw materials, and intermediate actives could be an effective measure.
For example, a technology company might preserve the durability of its electronic equipment. This would work in the short term as they would have to deal with technological outdated.
For Merchants
The accumulation of final actives could work since the price of products can be adjusted according to inflation and not the dollar.
Although this measure cannot be applied to perishable products or food. Especially the latter cannot be hoarded, since then the merchant could be seen as a "criminal" and would be stripped of his assets, even legally imputed and imprisoned. This is due to policies established by the national government.
For the People
One of the traditional ways would be the acquisition of real estate (apartments, houses, or land), as well as precious materials (gold, silver).
Cryptocurrencies have become a great "lifesaver" for many Venezuelan citizens since keeping the assets in the form of cryptos is an effective method to protect them from devaluation.
Unfortunately, the vast majority of Venezuelans can only accumulate very little Cryptography, since basic needs such as food, health, and hygiene are urgent and must be covered in an expeditious manner.
@juanmolina
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Most times I wonder why and what really happened that make the venezuela economy so down and alarming like that. Am imagining the living standard of people there
Everything is the product of the greatest corruption ever known in the history of mankind.
Congratulations, your post has been upvoted by @dsc-r2cornell, which is the curating account for @R2cornell's Discord Community.
Enhorabuena, su "post" ha sido "up-voted" por @dsc-r2cornell, que es la "cuenta curating" de la Comunidad de la Discordia de @R2cornell.
Hi @juanmolina
Thanks for sharing the price wise valuation of things in Venezuela. Covid has supported the price increase in many countries and I hope it does not go further.
thanks.
The effects of our situation outshines the effects of covid-19.
You cannot imagine what happens here, it is something incredible.
Hi @juanmolina
Thanks for sharing the price wise valuation of things in Venezuela. Covid has supported the price increase in many countries and I hope it does not go further.
thanks.
Hi @juanmolina,
What a perfect and clear description of the economic situation of Venezuela you have described in this first installment.
Certainly as you explain it, it is not the case of devaluation in USD, it is the distortion of prices in Bs that wrongly leads to the increase of the same item but in USD, something that I always considered inconceivable and unlikely but is happening at this very moment.
As for buying real estate as a measure of protection of the momentary funds or savings that you may have, this is just the time to acquire properties in Vzla, I have a stake in the real estate industry and I observe very closely the way the properties are falling in price abruptly even in the city of the country where the price per m2 of construction is more expensive in the whole country. This is the time to buy.
But who has savings in Venezuela? who can buy properties? this would deserve a full post
See you
Hi, dear @tocho2.
Thank you for your opinion, you have truly complemented my post.
Real estate will always be an option, although it has its ups and downs.
There is also a risk of losing your property due to an invasion by homeless people, or due to those government expropriations that have done so much damage to the economy.
That is why I recommend everyone to adopt cryptography.
Hugs!
Ye @juanmolina friend, crypto assets are the future of economic movements...!
The future of the World Economy.
It is almost impossible for the common citizen to be able to protect itself of the devaluation of the currency, mainly because its salary this established in an amount in BS and while the price of the dollar with respect to the bs continues increasing the average citizen continues maintaining the same salary and with the passage of the days it reaches him every time for less.
Sad reality.
Because of this reason, we must adopt crypto.
Sad reality.
Because of this reason, we
Must adopt crypto.
- juanmolina
I'm a bot. I detect haiku.
Hello friend, it is a rather critical situation in our country, for nobody it is a secret that it is in chaos and sincerely I do not see a light at the end of the tunnel, while this government in charge things will be worse and worse. The situation is practically untenable.