Faced with nearly incomprehensible inflation — 32,714 percent at the middle of this month — Venezuelan officials thought they had a solution: to change the color of the bank notes and increase their denomination by 95 percent. Then they cut off three zeros. And then two more. The problem is people still are swapping mullets and snappers for packages of flour, rice and cooking oil.
Slashing zeros from Venezuela’s inflation-cursed currency, the bolívar, is the tent-pole of a set of economic changes by president Nicolas Maduro as he tries to right his country’s capsized economy. The five-digit inflation has earned Venezuela comparisons to the hyperinflation of Zimbabwe and Weimar Germany from the International Monetary Fund.
The newly minted currency, known as the sovereign bolivar, was accompanied an increase in gas prices for some drivers and a modest ease in the currency controls.
By removing the zeros, the president Maduro is looking to solve what economists call hyperinflation’s wheelbarrow problem — the point when the currency has become so worthless that a wheelbarrow of cash is necessary to make purchases. And the figures of inflation keep around 100,000 percent and might reach 1,000,000 percent according to the IMF.
But the problem isn’t to do with the zeros, but rather with the cause. The Venezuelan government depends on sales from its state oil company to pay its debts. But mismanagement allowed production to sink to 1.2 million barrels a day in July — on par with the monthly rate in 1947.
A swap economy
In the hyper-inflationary South American country, where bank notes are as difficult to find as chronically scarce food and medicine, Venezuelans are increasingly relying on to barter for basic transactions.
Payment for even the cheapest of goods and services would require unwieldy piles of banknotes, and there simply are not enough of those in circulation.
While formal businesses in cities can get by on bank transfers and debit cards, such operations are largely out of the question in rural areas.
So, the rise of barter exchange, amid hyperinflation and a dearth of cash, is a reflection of how the once-prosperous country is reverting to the most rudimentary of mechanisms of commercial exchange.
The economists said that the central bank has not printed bills fast enough to keep up with inflation, and now the denominated money haven’t solved the problem.
As an effect, already drove around one million people – 3 percent of the population – to emigrate.
The president Maduro was reelected to a fresh six-year term in May, blames spiraling consumer prices and constant shortages of food and medicine on an economic war led by the opposition and Washington.
So, in Venezuela in the mean time, people, especially from rural areas prefers to be paid in food instead of money. A haircut in Venezuela costed Bolivar 1 million, and the hairdressers prefer to receive food instead of money.
The fishermen as well ask for their product rather rice or oil, than money and Venezuela is starting to return to old times, when the money were in the best case scenario pebbles or clams.