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Venezuela

What's Really Behind Venezuela's Vanishing Banknotes

Venezuela is not running out of banknotes due to criminal or speculative hoarding.

Where did the banknotes fly away?
Where did the banknotes fly away?
Farid Kahhat

-OpEd-

LIMA — One of the most lucrative businesses in this part of the world is to buy government-subsidized goods from Venezuela and sell them at market prices in Colombia. This includes buying U.S. dollars inside Venezuela to trade outside the country.

The same used to happen in Peru. Under President Juan Velasco in the 1970s, leaving Peru with undeclared dollars was an offense. During the first presidency of Alan García, from 1985 to 1990, government-subsidized goods were bought in Peru and then sold at market prices in Ecuador.

When the Venezuelan government accuses criminal gangs of speculative dealings, it has a point. But many economists suggest that the roots of such speculation lie in state policies that alter economic incentives and thus make criminal transactions more profitable than any legal activity.

The Venezuelan government's allegations that criminal gangs are hoarding 100-bolívar banknotes abroad is unusual. The International Monetary Fund estimates inflation in Venezuela has reached 700% this year. In these conditions, it's logical to acquire U.S. dollars. After all, the Venezuelan currency is losing value everyday. Venezuelan banknotes will soon become just bits of paper with printed drawings.

100 bolívars equal two U.S. cents — Photo: JF Ferrer Paris

If you intend to buy U.S. dollars with your 100-bolívar bill, there's no sense taking it abroad where you will be paid barely anything for it. At current market rates, 100 bolívars equal two U.S. cents. Inside Venezuela, you could get considerably more for your money. If these "mafia gangs' want profit at the end of the day, there's no sense in taking Venezuelan banknotes out of the country!

The accusation that their goal is political destabilization doesn't make sense either. Removing cash from circulation in a country suffering severe inflation — an excess of circulating cash — could actually help reduce prices. But it's true that the situation changes between a very high inflation rate and hyper-inflation. Economists Steve H. Hanke and Charles Bushnell of Johns Hopkins University recently concluded that Venezuela is the seventh Latin American economy to experience hyperinflation.

In that context, the flight of a local currency that's losing value by the hour does broadly explain its scarcity. It's not a case of bills disappearing but the need for a massive, and growing, quantity of banknotes. This has precedent. In 1990, Peruvian novelist and presidential candidate Mario Vargas Llosa removed campaign billboards that promised to print fewer banknotes to tackle hyperinflation.

Another indication that Venezuela's problem is one of economic policy and not mafia gangs is that no other member state of ALBA — the socialist, Venezuela-led trading bloc — is suffering similar attacks by speculators. If this is a case of international sabotage to punish Venezuela for pursuing independent economic policies that harm the interests of foreign capital and local elites, then why is the same not happening in Bolivia and Ecuador?

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Migrant Lives

What's Driving More Venezuelans To Migrate To The U.S.

With dimmed hopes of a transition from the economic crisis and repressive regime of Nicolas Maduro, many Venezuelans increasingly see the United States, rather than Latin America, as the place to rebuild a life..

Photo of a family of Migrants from Venezuela crossing the Rio Grande between Mexico and the U.S. to surrender to the border patrol with the intention of requesting humanitarian asylum​

Migrants from Venezuela crossed the Rio Grande between Mexico and the U.S. to surrender to the border patrol with the intention of requesting humanitarian asylum.

Julio Borges

-Analysis-

Migration has too many elements to count. Beyond the matter of leaving your homeland, the process creates a gaping emptiness inside the migrant — and outside, in their lives. If forced upon someone, it can cause psychological and anthropological harm, as it involves the destruction of roots. That's in fact the case of millions of Venezuelans who have left their country without plans for the future or pleasurable intentions.

Their experience is comparable to paddling desperately in shark-infested waters. As many Mexicans will concur, it is one thing to take a plane, and another to pay a coyote to smuggle you to some place 'safe.'

Venezuela's mass emigration of recent years has evolved in time. Initially, it was the middle and upper classes and especially their youth, migrating to escape the socialist regime's socio-political and economic policies. Evidently, they sought countries with better work, study and business opportunities like the United States, Panama or Spain. The process intensified after 2017 when the regime's erosion of democratic structures and unrelenting economic vandalism were harming all Venezuelans.

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