Venezuelans are dumping their fast-depreciating currency at a quicker pace, leading to a staggering plunge in its free-market value, as the crisis-plagued economy edges closer to an outbreak of hyperinflation.
DolarToday, a Web site that tracks exchanges made near the Colombian border, reported on Friday that the bolivar had lost one-quarter of its value over the past seven days.
Everyone in Caracas seemed to learn of the crash at the same time as the DolarToday app, a ubiquitous tool in the South American nation, sent out a series of messages announcing the new rates under the headline “hyperinflation!”
The Venezuelan currency was trading at about 420 bolivars per US dollar on Friday afternoon, according to the site. That was down from 300 bolivars per US dollar on May 14 and 173 bolivars at the start of the year.
Many black market dealers paused transactions until the rate stabilized, but some Venezuelans said they had changed money at the 400 bolivar rate on Friday.
It is not immediately clear what triggered the latest bout of panic buying and selling. However, for many Venezuelans, who have lost faith in their currency, the US dollar is the best way to protect themselves from inflation, which last year hit 68 percent and which economists say has already soared past the triple-digit threshold this year.
A Barclays Capital Inc report issued on Friday cited government expansion of the money supply as an underlying cause for inflation. The bank projected the Bolivar could dip as low as 600 to the US dollar this year.
“We do not see any signal of change from the authorities, but these risks should make them reconsider their policies,” the report said.
Venezuelan President Nicolas Maduro’s administration keeps tight control over the legal exchange of bolivars, using a three-tier system. The system is meant to subsidize crucial imports, but has also led to widespread corruption and speculation.
One official rate is 6.3 bolivars per US dollar. The weakest official rate, which was billed as an alternative to illegal currency exchanges when it was rolled out earlier their year, has inched up to 200 bolivars per US dollar. That many people are willing to pay double that on the black market indicates the supply of US dollars is limited.
The Maduro administration has been hoarding US dollars as it grapples with falling oil prices. That has contributed to shortages and other economic distortions.
DolarToday is openly hostile to the socialist government and frequently picks up articles attacking the administration. However, the site insists its exchange-rate reports are based on actual trades at the border and are not manipulated to undercut the government.
Last month, Maduro repeated his assertion that the site’s shadowy managers, whose identities are not public, are collaborating with the speculators and opposition leaders he blames for the nation’s problems. He accused them of purposely sowing chaos and promised to have them arrested.
“We’re going to put those people at DolarToday who are waging an economic war against Venezuela behind bars sooner rather than later,” he said.
The site, which is sometimes blocked within Venezuela, responded with a cheeky video documenting its popularity set to the club hit Turn Down for What.
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