Venezuela Is Now Awash in U.S. Dollars

Andrew Rosati
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Venezuela Is Now Awash in U.S. Dollars

(Bloomberg) -- Editors Note: There are few places as chaotic or dangerous as Venezuela. “Life in Caracas” is a series of short stories that seeks to capture the surreal quality of living in a land in total disarrayWe used to catch only rare glimpses of them in public. A waiter willing to risk jail time might be persuaded to accept them for the right price. Amateur tourists would flash them at the airport. Shady street hawkers made offers for them under their breath.Now, U.S. greenbacks are everywhere. They’re stacked high in cashiers’ drawers at supermarkets and bodegas and even make their way into panhandlers’ cups. The wealthy tip parking valets with singles and pull out wads of twenties to pay for buckets of beer. Currency traders casually set up on busy street corners in slums and shout, “Compro dolares, compro dolares”—“I buy dollars.”With the bolivar all but worthless, devalued into irrelevance by the autocrat Nicolas Maduro, the cash printed by the gringos he rails against has become king. It is beyond ironic that Washingtons and Benjamins—and not the domestic notes named for the South American independence hero—are keeping the consumer economy afloat.Until recently, using foreign money was a crime the government enthusiastically threatened to prosecute. After the ruling socialists established currency controls back in 2003, they began patrolling for transactions that ran afoul of their Kafkaesque rules about money. Plain-clothed inspectors ran stings and raided businesses.While very few people actually ended up behind bars, the government definitely succeeded in spooking everybody. We kept the bills tucked away for fear of sending signals to kidnappers and cops. We talked in code, calling them “lettuces” and “greens.” I conducted a few transactions in dollars in those days, swapping cash on a stove in a restaurant kitchen or in an empty office backroom. The recipients of my treacherous bills would nervously shut windows and doors as they led me away from prying eyes.It took inflation hitting six digits and widespread hunger for the regime to finally begin dismantling the complicated mess of controls. Now the authorities don’t blink when they see dollars bandied about. Their government is too broke and too dysfunctional to try to dictate the terms of commerce anymore. Their 21st Century socialism has given way to savage capitalism.The unwinding of the rules that began last August was welcome for anyone tired of dealing with the dizzying amount of zeros involved in bolivar prices, hauling around bundles of all-but-worthless notes and praying the credit-card reader would, just this once, work. Now we could use real money. It isn't terribly hard for anyone, rich or poor, to get their hands on dollars. People bring them into the country from visits to border towns in Colombia and Brazil or from travels further abroad.It was the great blackout, when most of Venezuela was without power and a functioning banking system, that accelerated the de facto dollarization of the economy. In the darkness, toting around hard currency was the only way you could be certain you’d manage to do any form of shopping.Once the lights finally—and mercifully—came back on, some stores and restaurants kept displaying prices in dollars. Now at the specialty shops that have been popping up in eastern Caracas, offering everything from Fruit Loops to homemade cookies to bottles of Budweiser, the clerks will tell you they’ll gladly accept an electronic transfer via Zelle or PayPal if you don’t have the cash.According to the calculations of one top bank executive, about 30% of all transactions are made in dollars these days. I’d be shocked if that percentage didn’t keep growing. Which seems to be making moot one of the big theoretical debates in opposition circles: whether to adopt the dollar as Venezuela’s currency if they finally manage to take power from the socialists. The people already have.\--With assistance from Fabiola Zerpa and Daniel Cancel.To contact the author of this story: Andrew Rosati in Caracas at arosati3@bloomberg.netTo contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net, Anne ReifenbergFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

(Bloomberg) -- Editors Note: There are few places as chaotic or dangerous as Venezuela. “Life in Caracas” is a series of short stories that seeks to capture the surreal quality of living in a land in total disarray

We used to catch only rare glimpses of them in public. A waiter willing to risk jail time might be persuaded to accept them for the right price. Amateur tourists would flash them at the airport. Shady street hawkers made offers for them under their breath.

Now, U.S. greenbacks are everywhere. They’re stacked high in cashiers’ drawers at supermarkets and bodegas and even make their way into panhandlers’ cups. The wealthy tip parking valets with singles and pull out wads of twenties to pay for buckets of beer. Currency traders casually set up on busy street corners in slums and shout, “Compro dolares, compro dolares”—“I buy dollars.”

With the bolivar all but worthless, devalued into irrelevance by the autocrat Nicolas Maduro, the cash printed by the gringos he rails against has become king. It is beyond ironic that Washingtons and Benjamins—and not the domestic notes named for the South American independence hero—are keeping the consumer economy afloat.

Until recently, using foreign money was a crime the government enthusiastically threatened to prosecute. After the ruling socialists established currency controls back in 2003, they began patrolling for transactions that ran afoul of their Kafkaesque rules about money. Plain-clothed inspectors ran stings and raided businesses.

While very few people actually ended up behind bars, the government definitely succeeded in spooking everybody. We kept the bills tucked away for fear of sending signals to kidnappers and cops. We talked in code, calling them “lettuces” and “greens.” 

I conducted a few transactions in dollars in those days, swapping cash on a stove in a restaurant kitchen or in an empty office backroom. The recipients of my treacherous bills would nervously shut windows and doors as they led me away from prying eyes.

It took inflation hitting six digits and widespread hunger for the regime to finally begin dismantling the complicated mess of controls. Now the authorities don’t blink when they see dollars bandied about. Their government is too broke and too dysfunctional to try to dictate the terms of commerce anymore. Their 21st Century socialism has given way to savage capitalism.

The unwinding of the rules that began last August was welcome for anyone tired of dealing with the dizzying amount of zeros involved in bolivar prices, hauling around bundles of all-but-worthless notes and praying the credit-card reader would, just this once, work. Now we could use real money. It isn't terribly hard for anyone, rich or poor, to get their hands on dollars. People bring them into the country from visits to border towns in Colombia and Brazil or from travels further abroad.

It was the great blackout, when most of Venezuela was without power and a functioning banking system, that accelerated the de facto dollarization of the economy. In the darkness, toting around hard currency was the only way you could be certain you’d manage to do any form of shopping.

Once the lights finally—and mercifully—came back on, some stores and restaurants kept displaying prices in dollars. Now at the specialty shops that have been popping up in eastern Caracas, offering everything from Fruit Loops to homemade cookies to bottles of Budweiser, the clerks will tell you they’ll gladly accept an electronic transfer via Zelle or PayPal if you don’t have the cash.

According to the calculations of one top bank executive, about 30% of all transactions are made in dollars these days. I’d be shocked if that percentage didn’t keep growing. Which seems to be making moot one of the big theoretical debates in opposition circles: whether to adopt the dollar as Venezuela’s currency if they finally manage to take power from the socialists. The people already have.

--With assistance from Fabiola Zerpa and Daniel Cancel.

To contact the author of this story: Andrew Rosati in Caracas at arosati3@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net, Anne Reifenberg

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.