Venezuela looks to be going the way of Ecuador at the turn of the century as an increasing number of items are now only available for purchase in U.S. dollars and not the inflation-ridden Venezuelan Bolivar. Ford trucks, chic apartment in Caracas or an American Airlines flight to Miami are all still on offer in the country, just not with the local currency.
The South American nation is spiraling into economic chaos thanks to a tailspin on the black market for the Bolivar last week.
As the anti-American rhetoric of the socialist administration grows more strident businesses and individuals are turning to dollars at a faster rate than ever.
It’s a positive shift that’s allowing parts of the economy to inch along despite a cash crunch and the world’s highest rate of inflation. The downside is that, temporarily, it puts some goods further out of reach of the working class, whose well-being is the supposed focal point of the country’s 16-year-old socialist revolution.
The latest sign of a shift towards a dual-currency economy came earlier this month when Ford Motor Co. union officials announced the company had reached a deal with officials to sell all vehicles in U.S. dollars only.
The move follow that of American Airlines a few weeks earlier, which stopped accepting bolivars for any of its 19 weekly flights out of Venezuela. Customers are now required to use a foreign credit card to buy the tickets online. That move followed all other foreign carriers, who made the same switch with the government’s consent, according to the Venezuela Airlines Association.
The shift is the result of a crumbling value of the bolivar, which has lost more than half its value this year, plunging to 400 per dollar on the free market as Venezuelans flee the troubled currency in order to move their savings into something more stable.
It’s a politically unstable situation for socialist President Nicolas Maduro, who regularly leads chants of “gringo go home” and blames currency speculation from enemies as the culprit for the fall in value.
The administration, while publicly blaming everyone but itself, likely sees a limited dollarization as the only way to stop multinationals from leaving the country, as Clorox did last year.
Clorox left because of problems brought about by decade-old currency controls, supply shortages and inflation that hit 68 percent last year. Economists believe the rate of inflation this year will reach well into the triple digits.
The move by Ford to accept only dollars comes as production has fallen by 90 percent due to struggles to gain access to dollars needed to import parts.
Customers now have to transfer to Ford U.S. dollars in advance of delivery, so that Ford can pay for the import of the parts needed to assemble the cars in Venezuela, according to union officials.