When will the Venezuelan bolivar collapse?

US dollars instead of Bolívar in Venezuela

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Without the US dollar, not much is going on in everyday life in Venezuela. The green notes are now accepted almost everywhere as a means of payment, cash in the national currency Bolívar is hardly available. A year ago, the US currency was officially frowned upon and only available on the black market. But in November, President Nicolás Maduro suddenly described the dollar as a "safety valve" that could serve to allow the "productive forces of the country to recover and develop".

Between October 2018 and March 2019, the government had legalized the exchange of dollars and de facto abolished the price controls that existed for numerous everyday goods. As a result, most products are now back on the supermarket shelves, albeit at horrendous prices.

After years of severe economic crisis, hyperinflation has devalued all savings and wages in the national currency Bolívar, the minimum wage is the equivalent of only a few dollars per month. Most Venezuelans could not survive without the almost free grocery boxes that a large part of the population receives from the government, as well as remittances from migrant family members.

Opaque privatizations

At the same time, an infrastructure is growing in the capital Caracas that only appeals to wealthy people. Expensive imported goods are offered in shopping centers. Hip cafes have sprung up in the historic city center, presumably opened by business people close to the government.

The government itself is privatizing state-owned companies in a non-transparent manner. Since the opening of the economy corresponds to the exact opposite of the economic policy of the Maduro predecessor and Hugo Chávez, who is still revered in the slums, the government announced these measures very cautiously, says the left, government-critical economist Manuel Sutherland.

On the other hand, Maduro officially adheres to the goal of socialism. "With the socialist discourse, the government is addressing its own base, because it has to show that it is different from the opposition," says Sutherland, director of the research and training center Centro de Investigación y Formación Obrera.

The government primarily blames the US sanctions for the crisis. After the chairman of parliament and leader of the right-wing opposition, Juan Guaidó, declared himself interim president in January of last year with the support of the USA, the US government drastically tightened the sanctions. They worsen the situation - especially for the poorer population, because they can hardly cushion the economic crisis privately due to a lack of reserves.

Political stalemate

It is hardly to be expected that the use of the dollar will show a way out of the economic crisis. The political power struggle blocks almost everything, and the government has few instruments to make urgently needed investments.

The prospect of the rapid change of government promised by Guaidó has not existed for months. The opposition leader failed to win the Venezuelan military on his side, nor did the US sanctions lead to a complete economic collapse.

In the end, Guaidó was barely able to mobilize on the street. Timid attempts at negotiation with the mediation of Norway petered out. In addition, several corruption scandals shook the now divided right-wing opposition.

At the beginning of January the Venezuelan power struggle boiled up again. Both Guaidó and the renegade opposition member Luis Parra have since claimed the chairmanship of parliament.

Parra broke with the opposition majority in December after it was discovered that he and other MPs were alleged to have helped government-affiliated businesspeople circumvent US sanctions on the government's food program.

What would be needed would be a political solution that would have to include the lifting of US sanctions and the negotiated re-election of all political powers. But this seems to have moved further into the distance. (Tobias Lambert, Südwind-Magazin, February 14th, 2020)

Tobias Lambert lives in Berlin. He works as a freelance writer, editor and translator mainly on Latin America.