First it was Germany in 1923, followed by Zimbabwe in the late 2000s and now Venezuela. The ugly head of hyperinflation has once again reared its head and is on track to become one of the worst in modern history.
The problem is so grave that people have resorted to the age-old custom of barter as currency is hard to come by.
Julio Blanco, a 34-year-old motorcycle driver in Caracas, said he now allows trusted clients to make payments by bank transfer because there is simply not enough cash available. “I prefer food as payment,” said Blanco, while waiting for customers at the poor west end of Caracas.
Alfredo Silva offers a haircut for 1 million bolivars, about 30 cents at the black market exchange rate.
He accepts transfers or food but sometimes takes clients to a nearby butcher shop and asks them to buy him something worth the same as the haircut, a Reuters report said.
The problem of hyperinflation is weighing on the livelihoods of millions of Venezuelans, who are looking for alternate ways to survive.
The International Monetary Fund (IMF) has warned that inflation in this South American country could touch 1 million percent. Venezuela has also decided to remove five zeroes from its currency as hyperinflation continues to scale new peaks.
To put this into context, a cup of coffee in Venezuela now costs at least 1 million bolivars or 30 American cents. 1 million bolivars is what you will have to pay if you want to treat yourself to the luxury of a haircut.
In simple economic terms, hyperinflation is when the prices of goods (and services) rise more than 50 percent a month. In Venezuela, prices for goods have risen 46,305 percent this year alone.
The abundance of oil has given way to an abundance of chaos.
Many attribute crash in oil prices of 2014 as the primary reason for Venezuela’s economic distress. The country, known for its subsidies for the poor and price controls, outspend itself as it thought higher oil prices were here to stay.
The ‘resource curse’ and paradox of plenty is haunting the country like no other. To put this in yet another context, in 2016 Venezuela needed oil to be at $121 per barrel in order to balance its budget. At that time, oil was trading at $46 per barrel.
The analysts at Nomura recently estimated that Venezuela may need oil prices to hit $200 a barrel in order to balance its budget.
How is Maduro’s Venezuela meeting this shortfall? By printing money and what does this lead to? Falling in the value of the bolivar, loss of income and jobs. Data suggests that between 2015 and 2017, three percent of Venezuela’s population has left the country.
“A packet of corn flour, the most basic ingredient for making arepas (corn cakes that are a key part of the Venezuelan diet), costs 80,000 bolivars in cash ($1.60), 110,000 by debit ($2.20), and 130,000 by bank transfer ($2.60),”
CN Traveller quoted a Venezuelan. Nayrobis Rodriguez, on May 7, 2018, wrote that in March she was able to get 150,000 bolivars ($3.00) in cash and could pay for my son's transport to and from school for a week.
President Maduro is blaming his opponents and economic war waged by the US for its woes. Meanwhile, Mileidy Lovera, walking along the shore with a cooler of fish that her husband had caught, hopes to exchange it for food to feed her four children, or medicine to treat her son’s epilepsy.
“There is no cash here, only barter," she said.
(With inputs from Reuters)