Sat, Jul 28, 2018 - Page 9 News List

Venezuelans struggle to survive as
inflation heads for 1 million percent

As a five-year crisis continues, people are unable to afford food and medicine — even as Nicolas Maduro tightens his grip on presidential power

By Joe Parkin Daniels and Maria Ramirez  /  The Guardian, BOGOTA and CIUDAD GUAYANA, Venezuela

Illustration: Lance Liu

Two years ago, shoppers in Venezuela would pay fruit sellers like Jose Pacheco with boxfuls of 100 bolivar notes — then the currency’s highest denomination. Now, thanks to rampant hyperinflation, even those are useless.

“It’s crazy to accept notes of 100, 500, or 1,000 bolivares,” said Pacheco, a wiry 61-year-old whose humble stall clings to the fringe of one of the major markets in Ciudad Guayana, a city in Venezuela’s southern Bolivar State.

He now only accepts newly minted 100,000 bolivar notes, which due to demand are hard to come by.

“Otherwise it’s a box [full of notes] that afterwards we have to take to the bank,” he said.

Inflation in the embattled South American country could reach 1 million percent by December, the IMF said this week, reflecting an economic crisis comparable to Germany’s after World War I and Zimbabwe’s at the beginning of the last decade.

Venezuela, which has the largest proven oil reserves on the planet, is in the middle of a five-year crisis that has left many of its people unable to afford food and medicine, with shelves bare in supermarkets.

Crime rates continue to set records, with local residents fearful to leave their houses at night.

Alejandro Werner, the head of the IMF’s western hemisphere department, elaborated on the grim prognosis.

“We expect the government to continue to run wide fiscal deficits financed entirely by an expansion in base money, which will continue to fuel an acceleration of inflation as money demand continues to collapse,” he wrote in a blogpost on Monday night.

For ordinary Venezuelans, everyday life has become a struggle to survive.

“We are millionaires, but we are poor,” said Maigualida Oronoz, a 43-year-old nurse who earns the minimum monthly salary of 5 million bolivares — barely enough to buy a kilogram of meat to feed her children. “We can just about eat, but if some health emergency happens, we’ll die because the prices of medicines are sky-high and rise every day.”

Many blame the country’s woes on Venezuelan President Nicolas Maduro, who in turn has said that Venezuela is on the receiving end of an “economic war” waged by the US and Europe.

Despite spiraling hyperinflation, Maduro has continued to tighten his grip on the power he inherited from former Venezuelan president Hugo Chavez, the late leader whose charisma carried him through tougher times.

Maduro, who lacks his mentor’s charm, won a second six-year term in May elections, although opposition politicians and many countries have said the result was illegitimate.

Maduro has said that private bankers are smuggling cash into neighboring Colombia as part of an elaborate conspiracy to sabotage the economy, and he has rejected calls to lift currency controls.

One of Maduro’s plans to alleviate inflation is to issue new banknotes with the last three zeros lopped off, although economists have said that would do little to help.

“It’s a cosmetic solution that won’t do anything,” said Asdrubal Oliveros, director of Ecoanalitica, a Caracas-based economics consultancy. “With inflation this wild, in a few months we’ll be back in the situation.”

Unlike in 1920s Germany, people in today’s Venezuela are not carrying wheelbarrows of cash to buy groceries. Instead, they have turned to electronic transactions.

However, 40 percent of Venezuelans do not have bank accounts, while others are unwilling to use credit cards or cryptocurrencies to pay for for smaller items, so bartering has become common.

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