One week after regime defended the practice, greenback doubles in the black market
By Carlos Camacho
CARACAS -- Everything is ok, embattled Venezuelan leader Nicolas Maduro seemed to say during an interview a few days ago: now we have something called “dolarización”, and that has been a life saver.
“The process of dolarizacion can be useful for the functioning of the economy”, Maduro said in stilting, doubting tones. “An escape valve, yes? Well, thank God that exists!”, he told pliant journalist and longtime ally Jose Vicente Rangel during a taped television interview about a week ago.
The strongman never finished high school and his grasp of economics has been described by long-time former collaborators like Luisa Ortega as “lacking” at best.
But he was both “lacking” and wrong: the black market rate in Venezuela doubled in the week since Maduro said “dolarizacion”, the process through which Venezuelans ignore the Constitution (which enshrines the beaten Bolivar as the currency of the land) and insist on paying and collecting everything in US dollars, was OK. The US dollar went from a parity of BS 20,000 per greenback earlier this month to Bs 42,000 and higher Thursday afternoon.
Meanwhile, the foreign reserves with the Central Bank are now around US$8 billion -- a level Venezuela first achieved in 1974.
That is even lower than they were when Hugo Chavez took over in 1999, when they were at around $10 billion -- and one of the main selling points of Chavez's campaign in late 1998 was low reserves and the need to boost them.
And reserves did go up -- though the increase was because oil prices went from $8 a barrel to $127 a barrel in 2008, boosting them to a record US$43 billion.
Ever since they have done nothing but decline, now to new, near-all-time records.
Reuters news went as far as reporting -- citing unnamed sources -- that state oil firm PDVSA was paying clients in Chinese Yuan Renminbi, suggesting that one of the largest oil companies in the Western Hemisphere was unable to pay in U.S. dollars.
Only a few days ago the US dollar was the answer to Maduro’s prayers: “All of the economies in the planet, because of the weight of the dollar as hegemonical factor in international currencies, are dollarized, that is a debate that is ongoing in Venezuela,” Maduro said in increasingly confident tones as the interview progressed. “Why, there is a sector now, that has appeared in the economy that carries out its exchanges and functions with the dollar or other convertible currencies,” Maduro exclaimed, half amazed, half relieved.
Caracas consultancy firm Ecoanalitica estimates the US dollar will be trading at Bs 95,000 by year’s end. Although that estimate may be understated -- their previous prognosis of Bs 44,000 to the dollar for December has now been surpassed.