Venezuelan Vice President Delcy Rodríguez has stated that the bolívar has recovered its value by at least 6% from July 2021 to February 2022.
In recent weeks, the Venezuelan economy is showing a tendency that until recently was considered unusual: dollar-bolívar parity is no longer a concern, and much less a reason to rush out and buy foreign currency.
The daily rise of the dollar price with respect to the bolívar has been part of the daily conversation in Venezuela for a long time, as well as getting WhatsApp updates offering to buy or sell dollars, but this seems to be disappearing from daily life now. Nor is it a matter of urgency to check twice a day the price of the so-called “parallel exchange rate,” which until last year increased the dollar value exponentially over the bolívar and was used as the main market reference.
Thus, the economic maelstrom that Venezuela went through from 2016 to mid-2021, with the unprecedented uncontrollable hyperinflation that destroyed the people’s purchasing power and their quality of life, and which depreciated the bolívar as a currency, as money no one wanted in their pocket, now shows a different dynamic.
In this scenario, shops have started to mark their prices in bolívars only, when before—in the midst of the hyperinflationary crisis— their shelves only showed labels with prices in dollars which were used to calculate the final payment of a product according to the exchange rate dictated by the parallel market and subject to its constant and daily fluctuations.
Although foreign currency transactions still occur—mostly with dollars in cash, crypto assets and foreign digital payment methods, there is now a marked preference for the use of bolívars through electronic payment methods and even bills that are kept in circulation.
At the beginning of this week, presentating a report at the National Assembly, Venezuelan Vice President and Minister of Economy and Finance, Delcy Rodríguez, informed that between 2021 and 2022, bolívar has recovered its demand and has gained a 6% rise in value.
How this was achieved
Vice President Rodríguez explained that the current economic dynamic is the product of a series of measures applied by the government since August 2018, through its “Recovery, Growth and Prosperity Plan” put in effect by President Nicolás Maduro.
The vice president pointed out that different actions have been carried out that began with the repeal of the Illicit Foreign Currency Exchanges Law “to facilitate the entry of foreign currency,” which has allowed the free circulation of the dollar and other currencies “in all of Venezuela’s commercial circuits.”
Other important measures were the substitution of price controls for a scheme agreed upon with the productive sectors, tax and tariff reforms, and the creation of a new foreign exchange market where various economic sectors may participate and which has made it possible to fix the value of foreign currency in the legal market, and not through the “parallel dollar.”
#EnVideo📹| Vpdta. Ejecutiva de la República, @delcyrodriguezv dio detalles del Plan de Recuperación Crecimiento y Prosperidad, anunciado en agosto del 2018 por el Mandatario Nacional @NicolasMaduro. #ElAguaEsSaludYVida pic.twitter.com/ZJf0Eowq5o
— VTV CANAL 8 (@VTVcanal8) March 22, 2022
Rodríguez also highlighted the approval of the Anti-Blockade Law, created to attract foreign investment through “safe conducts” amidst the US and EU imposed sanctions, and through the establishing of a dialogue with the private sector through the National Economy Council, which has been “essential for the progressive recovery of Venezuela’s domestic production.”
Another policy that has helped in economic recovery was the public procurement program, which privileges the acquisition of made-in-Venezuela products over imported ones. This has had a positive impact on local production in various sectors.
Although current economic policies seek to break with Venezuela’s oil rent dependency, due to the distortions it generates in the economy, Vice President Rodríguez explained that the current situation is also due to the resurgence of the oil industry, the production of which raised in December 2021 to more than 1 million barrels per day, and the goal is to reach 2 million by 2022.
Impact of the digital bolívar
Vice President Rodríguez pointed out that another key point was the implementation of the Monetary Recovery Program, which included the launch of the digital bolívar and the use of a fiduciary currency with six zeros less.
She commented that in January 2019, when the US-sponsored “interim government” was imposed, monthly inflation reached its peak at 197%, which was Venezuela’s “maximum point of economic and financial suffocation.”
“A year ago we said that the currency of legal tender is and will continue to be the bolívar and today we can show significant rates of recovery of our currency and our monetary sovereignty,” stated Vice President Rodríguez.
Moreover, one of the main threats to the economy was the imposition of a parallel currency exchange market, since it served as “one of the most used instruments” by “extremist and coup sectors” to attack the Venezuelan population.
— MIPPCI (@Mippcivzla) March 3, 2022
Rodríguez gave as example the unofficial dollar price between July 2019 and February 2020 which multiplied six times, and during that same period from 2020 to 2021, dollar climbed seven times over the bolívar. However, between July 2021 and February 2022, the price of the dollar barely grew 15%, a figure that responds to the activity of the exchange tables in which the price published by the Central Bank of Venezuela (BCV) is set and which has allowed the bolívar to rule over the parallel dollar.
In addition, the recovery of the bolívar is also linked to an increase in banking currency which affects the use of the Venezuelan currency through various digital payment methods, which by the end of 2021 was being used by 91% of the Venezuelan population of 16 years and above.
“Those who have called for the dollarization of the Venezuelan financial system and to give up monetary sovereignty, have been confronted by this new reality,” Rodríguez said. She explained that this change includes an end to the hyperinflationary cycle and the containment of an inflation which in the last six months has remained below two digits, closing in February at 2.9%, the lowest in eight years.
The Venezuelan economy has also shown positive indicators in 2021, such as an increase in corn and rice production, which compared to 2020, grew by 60% and 17% respectively.
“This is the product of the efforts made by the private sector, the productive social movements, and by government policies that have approved the expansion of credits and the imposition of technical standards,” Rodríguez stated. She also indicated that these advances go hand in hand with a “strategic substitution of imports” policy.
Another important point has been food production, which at the time of the imposition of US sanctions on the Venezuelan oil industry in 2017 had barely reached 20%. At the end of 2021, national food production has grown and Venezuela has achieved 89% food sovereignty.
Vice President Rodríguez specified that in 2018 the import of raw materials and food fell mainly on the Venezuelan State, which covered up to 98% of imports of raw materials and food. Now, by 2021, 100% of these will be executed by the private sector and the productive cooperatives through their own resources.
#EnVideo📹| "Hemos concentrado nuestros esfuerzos en sectores que pueden tener un alto porcentaje de productos nacionales, como los alimentos primarios y procesados", afirmó la Vpdta. Ejecutiva, @delcyrodriguezv #ElAguaEsSaludYVida pic.twitter.com/HqrPUgXygg
— VTV CANAL 8 (@VTVcanal8) March 22, 2022
Non-traditional exports have also grown, rising by 76% in 2021 compared to 2020. According to Rodríguez, this has led the Economic Commission for Latin America and the Caribbean (ECLAC) to rank Venezuela in eighth place among the countries of the region that export the most.
Other important data shows a growth in hotel occupancy and tourism which increased 94% in 2021 compared to 2019, a year that was not affected by the pandemic. Also, the “progressive increase” in tax collection, which so far in 2022 has already grown 120% compared to 2021, has allowed President Maduro to approve a 1,705% minimum wage increase, starting from March 15, which rose from about 8 bolívars to 130 bolívars per month (around $30) plus bonuses and which has impacted the salary scale of public workers and pensioners.
What do Venezuelans think?
Yoelis Martínez, a passer-by in Caracas, told RT that she no longer considers there is any advantage in using dollars, and says that the value given to that currency during hyperinflation has fallen. “If I have dollars in cash, I prefer to spend them and keep the bolívars in my account because they are no longer as devalued as before, she said. “I can use those bolívars to pay for online services and even save them.”
According to Jesús Muñóz, a worker in a commercial establishment, the attachment that people had to dollars has been disappearing. “People who come here pay with dollars and bolívars,” he said. “Before they would get upset if you gave them change in bolívars but not anymore; many people even come to change their dollars because sometimes they need to have cash in bolívars.”
Mariel Acosta, a fast food vendor, pointed out that in recent months most people pay with bolívars in electronic transactions, such as debit cards, mobile payments, and also in cash. “We sell a hamburger for 5 bolívars or a dollar, and if we have to give change, we give it in 5 bolívars as well—we do that because of the difficulty of giving change in cents,” she explained. “If someone comes with 4.5 bolívars, we accept it, even if they pay us with a dollar that is around 4.3 bolivars. It all depends—people understand this and they know that we do not do it to charge more.”
Wilmer Camargo, a buyer, said that “since the dollar began to fall” he prefers to keep the foreign currency and pay with bolívars “as much as possible.” “I try to keep my savings in dollars because you never know when it’s going to shoot again and I prefer to have that money at home,” he expressed.
María Gabriela Navarro, another buyer, said that in “some commercial establishments” the prices in bolívars have dropped. “I went to buy some sanitary pads, they were priced at 9 bolívars and it seemed very expensive to me,” she said. “The next day, I went back for another product and saw the same pads had been lowered to 5 bolívars and I bought it. I think that is happening in several shops because of price controls.”
Daniel Figueroa, a freelance graphic designer said, “I pay almost everything digitally through zelle and paypal. A family memeber in the US sends me money through zelle. I try to use that money to buy food for the house and larger expenses because it’s easier for locals to receive it. As for Paypal, since it’s harder to find a place where to use it, I try to save it or, when I need to, I change it into bolívars, although sometimes they pay it well below the exchange rate.”
Oswaldo Pérez, a public worker, pointed out that, although the price of the dollar has remained stable and has even dropped in recent weeks, there is still a need to “improve a lot” regarding wages. “The raise that the president announced, although we value it, is insufficient,” he said. “Also, the percentages that we are being given in the salary scale are lower than what we previously had and that violates our collective rights. The government should review this well, it should not be the workers who are harmed the most.”
Rodrigo Álvarez, owner of a vehicle painting shop, states that a year ago he preferred to be paid in foreign currency and told clients that it was much easier to get the materials to repair their cars quickly. “Having bolívars in the account was a headache, because they devalued very quickly and I ended up losing money, so I had to charge a little more if they paid me in bolívars so as not to lose because of inflation,” he said. “I also tried to change them quickly to dollars or spend them at once. Not anymore.”
Andrea Marcano, a saleswoman at a shoe store opined that people are revaluing the local currency. “I think that people are beginning to love bolívars again,” she expressed. “It also seems that when you buy in bolívars it is cheaper than if you buy with dollars. You have to be very careful when you are going to pay with foreign currency, because sometimes something that used to cost 10 dollars can now cost you 12.”
What is yet to be done
In a recent speech, President Maduro stated that with the digital bolívar, Venezuela has taken “important steps” that have reflected its “great success.”
“Today the bolívar is on the road to become strong again—the bolívar is recovering lost territory,” said the president, and added that the country is heading towards “a total digital economy.”
Maduro pointed out that in order to continue strengthening “the real economy,” import substitution must be maintained, the national production chain strengthened, exports diversified and more foreign investment should be attracted.
“I said that when the growth of the real economy sets in by saving part of the taxes and guaranteeing the issuance of crisp bolívars, real bolívars; by the use of the oil wealth, with the sale of gold, with the international reserves; with oil reserves… we were going recover the national minimum wage and all wage scales and all collective contracts in a sustainable manner controlling inflation, controlling the exchange rate,” said the president. “That time has come.”
Translation: Orinoco Tribune