Government considering printing larger bank notes for
holidays
Triple-digit inflation means largest bill isn’t worth 10
cents
At a delicatessen counter in eastern Caracas, Humberto
Gonzalez removes slices of salty white cheese from his scale and replaces them
with a stack of bolivar notes handed over by his customer. The currency is so
devalued and each purchase requires so many bills that instead of counting, he
weighs them.
“It’s sad," Gonzalez says. "At this point, I think
the cheese is worth more.”
A bakery manager weighs banknotes in Caracas.
It’s also one of the clearest signs yet that hyperinflation
could be taking hold in a country that refuses to publish consumer-price data
on a regular basis. Cash-weighing isn’t seen everywhere but is increasing,
echoing scenes from some of the past century’s most-chaotic hyperinflation
episodes: Post-World War I Germany, Yugoslavia in the 1990s and Zimbabwe a
decade ago.
“When they start weighing cash, it’s a sign of runaway
inflation,” said Jesus Casique, financial director of Capital Market Finance, a
consulting firm. “But Venezuelans don’t know just how bad it is because the
government refuses to publish figures.”
Piles in Gym Bags
Start your day with what’s moving markets.
Get our markets daily newsletter.
Once one of the world’s strongest currencies, the bolivar
has been reduced to a nuisance. Basic purchases require hundreds of bills.
Shoppers shove piles of them into gym bags before venturing into crime-plagued
streets and shopkeepers stash thousands in boxes and overflowing drawers. In
the absence of official data, economists are left to guess what the inflation
rate is. Estimates for this year range from 200 percent to 1,500 percent.
For a QuickTake explainer on Venezuela’s economy, click here
Until now, as the bolivar sank, the government declined to
print bigger-denomination bills. The 100-bolivar note -- the nation’s largest
-- is worth less than a dime.
A few weeks ago, however, the government quietly asked five
currency companies to submit bids for bigger bills -- 500, 1000, 5000, 10,000 ,
and perhaps a 20,000-bolivar note, according to someone with direct knowledge
of the order.
The request is for the bills to be ready in time for
Christmas bonuses. Normally such an order takes four to six months and so far
no tender has been awarded. To minimize time and cost, the government is
considering swapping only the color, not the design, of existing bills, and
adding zeros, the person said. The Central Bank said it had no comment.
‘Raising the White Flag’
Steve Hanke, an economist at Johns Hopkins University, said
re-denominating banknotes is “raising the white flag. No one wants to do it,
but eventually their hand gets forced.”
For now, many Venezuelans live a kind of paradox: they are
awash in cash but can rarely afford to buy anything.
In truth, even getting hold of enough legal tender has
become an ordeal. Before embarking on their shopping odysseys, weary consumers
face long waits at the bank where dwindling numbers of cash machines have
strict limits.
Data from the Central Bank show that despite the increased
need for bank machines, their numbers have been declining. And whereas only two
years ago a typical ATM was restocked every few days, now it occurs every few
hours. In addition, many small towns have no machines at all and some 40
percent of the population have no bank accounts, according to Casique.
Permanent Bottleneck
Many, like Jose Marcano, a 26-year-old office messenger,
find themselves caught in a permanent bottleneck. Marcano spends hours each
week depositing his employer’s cash which he carries in black plastic bags on
his motorbike. When he can’t make it to an ATM, he flies through stop signs and
traffic lights, afraid of getting robbed.
A bucket of 1 Bolivar coins sits inside an office at a
market in Caracas.
“Carrying this amount
of cash is incredibly dangerous,” he said while feeding stacks of bolivars into
an ATM. “You put your life at risk.”
While there are credit and debit cards in Venezuela,
government data show that more than a third of the labor force is informal,
meaning they mostly work for cash. That includes taxi drivers, street hawkers
and a slew of service jobs. In addition, state pensions to the elderly are
generally paid in cash.
Authorities have recently taken a small step to ease the
cash crunch, allowing consumers to use bank cards to withdraw legal tender from
convenience stores and pharmacies.
Feeling Like Pablo Escobar
Many say that will only saddle Venezuelans with even more
bills until authorities print higher denominations.
Meanwhile, people like Bremmer Rodrigues, 25, who runs a
bakery on Caracas’ outskirts, are at a loss over what to do with their bags of
bills. Every day his business takes in hundreds of thousands of bolivars, which
he hides around his office until packing them up in boxes to deposit at the
bank. He says if someone looked in on him, he might be mistaken for a drug
dealer.
“I feel like Pablo Escobar,” he said. “It’s a mountain of
cash, every day more and more.”
Neteller here: www.ituglobalfx.com.ng
Super Trading Strategies: Super Strategies
No comments:
Post a Comment