In 2013, Cesar Chavez was elected president but consequently passed away due to cancer. Nicolás Maduro was then elected president through a special election with a narrow margin of a 50.62% majority. He quickly converted Venezuela’s democracy into a dictatorship in the following November by rule of decree, which he would then occasionally relinquish for short periods of time.
Since Maduro’s presidency, Venezuela has fallen into a state of socio-economic decline. The country had relied heavily on its oil revenue, partly due to Chavez’s policies, which inevitably made it susceptible to the market. When oil prices took at hit in 2014, the whole country suffered dipping into economic depression. Venezuela’s central bank started printing Bolivares to compensate which ultimately concluded in a 12 month 63.6% rate of inflation.
Since then, the country has declined into a state of hyperinflation reaching over a 13,000% rate of inflation in the last year alone.
In other words, Venezeula is the manifested reality of everything Bitcoin was designed to protect against:
- a government that doesn’t protect the value of its own government backed fiat currency
- a dictator that actively surveils its citizens for detractors.
It is in this context that cryptourrency has become a hedge for many who live there against the rapidly decreasing value of the Bolivares. However hypberbitcoinization, or reverting to Bitcoin as the standard currency for a nation, hasn’t been realized. One of the reasons for this is because the government has actually restricted shops to only accept Bolivares. (Update 7–11–18: According to other sources, the gov’t doesn’t restrict payment options to just Bolivares.)
Meet Pedro Perez
Pedro is a Venezuelan who I had the privilege of interviewing over the internet. Pedro isn’t actually his real name. It is the Venezuelan equivalent to John Doe. He has chosen to remain anonymous because he is scared that the Venezuelan gov’t will be to identify his voice, find him, and then put him in jail. The following is a summarized translation of the interview I had with Pedro, which you can find here:
Pedro, tell me. How bad is it exactly in Venezuela?
The minimum salary is 2.5 millions of Bolivares. A kilogram of meat costs 4.5 million Bolivares, a pound of rice and a pound of chicken costs 1.3 million Bolivares.
For you to have as a reference, let’s suppose you work in the U.S. 8 hours per day from Monday until Friday with a pay of $8 dollars per hour. This will give you a total of about 1,300$ dollars per month and then you go to the grocery store and you see a kilogram of meat is $2,500 dollars. Do you see?
Of course, part of the economy is coherent with the low salaries, but these keep getting lower every time. The only things that are proportional with the salaries are the public services like electricity, water phone line, gas, fuel, public transportation and internet. That and nothing else.
Not to mention you are also exposed to the insecurities, shortages and problems in hospitals and clinics. Venezuela is now today the most unsafe country in Latin America
How much is it to buy a cup of coffee? How much was it a year ago?
A cup of coffee with milk in January was 30,000 Bolivares and two weeks later it was at 50,000 Bolivares. In February it went up to 70,000 Bolivares. In March, I think the price was 100,000 Bolivares. That price was steady until April where it went up to 250,000 Bolivares. It is still at that price but I don’t know for how much longer.
How is cryptocurrency viewed in Venezuela?
Since a few years, there has been a lot of people making a lot of money mining here in Venezuela. The electricity is of bad quality but is basically free so it makes mining very profitable. The people who started mining are usually of high class and were capable of buying Antminers or GPUs.
As time passed a lot of people have read about this subject, especially younger people. Fortunately, the internet is not censored except for 2 or 3 websites. And it’s also very affordable which makes global news accessible just anywhere in the world.
And just like it happens everywhere in the world, not a lot of people understand the subject in general (my parents are one of them). At the end of last year, Maduro announced the Petro coin. The first cryptocurrency created by the government. This made a lot of people do some research and educate themselves on the subject. The propaganda put out by the government says that with only the Petro coin the country will recover. This is said without even providing any further details and fanatics repeat this over and over again without understanding the real concept of cryptocurrency.
That is crazy to me. I first read that Petro was supposed to be an ERC20 token which Maduro said would be “mined.” Then they decided to switch to NEM as the underlying blockchain. It doesn’t sound to me like they know exactly what they’re talking about. This could be one of the worst ICO scams to date. A central govornment, privately fundraising an ICO, with just a white paper, and their project isn’t open-source.
Yes. Them switching between ETH and NEM completely removes any confidence in the Petro coin. However to be clear, Petro will be a NEM token created by the government. In my opinion, the main goal is to skip the penalties the United States and the European Union has taxed on the agencies and government officials.
And I would say this, today is not possible to buy Petros with Bolivares. And legally, Venezuelans only have access to Bolivares.
Speaking of which, what are the “on” and “off” ramps to cryptocurrency there?
The way to obtain crypto is by mining, accepting payments in crypto (which a lot of young people who speak english and who are graphic designers, translators, programmers and work remotely do). Another way is to simply buy it in Localbitcoin with Bolivares. In LocalBitcoin you can do both, buy and/or sell.
Another way is to receive money via PayPal, Payza, Netteller or Uphold and transfer it to AirTM and then exchange it to Bolivares. By the way the AirTM website is blocked in Venezuela by DNS. This is one of the objectives of the operation called “Manos de Papel” which translates to “Paper Hands”.
Is cryptocurrency replacing fiat in Venezuela for day to day purchases?
Unfortunately, not yet. In fact, if you have a lot of cryptocurrency or dollars, you have to look for a way to exchange them to Bolivares because by law, stores and businesses can only accept Bolivares. (edit 7/11/18: According to other sources, businesses can accept cryptocurrency). This has become a problem because, for example, 1 LTC is 126,000,000 Bolivares which is about 60 months worth the salary of a worker. So the government with the help of banks (including private banks) started to “analyze” the movements between accounts just to see who is buying and/or selling dollars and/or crypto.
There are two types of exchange methods in Venezuela. One is out on the streets called Negro or Paralelo (which is illegal). This one is going currently for 900,000 Bolivares per dollar and it’s based on supply and demand. The other way is auction established and controlled by the government called “DICOM” and it goes for 70,000 Bolivares per dollar. The difference is almost 13 times. Even using the exchange rate of the government, the minimal salary would be 36.42 Dollars and that’s extremely low!
Basically, if one of my family members sends me 100 dollars, by the government’s exchange rate I would only get 7,000,000 Bolivares. This means I could only buy less than 2kg of meat. If that same amount of money (100 dollar) is exchanged in the black market, I would get about 90,000,000 Bolivares and would be able to buy 20 kg of meat. This is now coherent to international prices.
So the government wants to buy the dollar at 70,000 Bolivares per dollar but don’t want to sell it for this rate (the offer is limited). This gives it a reason for the black market to exist.
A serious government could eliminate that DICOM and legalize the black market’s rate. This would make the exchange rate be more stabilized. Some economists have actually said that at 200,000 Bolivares per dollar would make the exchange rate coherent.
I’ve heard reports that the Bolivar is now being measured by Bitcoin instead of the US dollar.
I don’t think that is true. The people who know and work with crypto must exchange to USD and then to crypto.
There’s been some discussion that the government took over the DolarToday website. Is this true?
Until a few months ago, a lot of people would use as a reference DolarToday.com. This is now a blocked website by DNS here in Venezuela.
For several months the price was 20,000 Bolivares per dollar all while the prices of products and services kept going up. In January when someone sent a family member in Venezuela 40 Dollars monthly, that would be enough but in March, those 40 dollars were now a different value because DolarToday would still show the rate to 200,000 Bolivares.
This made people fix it to the price they wanted, higher than the one stated on DolarToday. DolarToday was 200,000 Bolivares and people were selling for 300,000 Bolivares. Exactly today, DolarToday is at 710,000 Bolivares and people here are are selling for 900,000 Bolivares.
A lot of people say this happened because the government took control over DolarToday. I don’t believe it. They only publish the the exchange rate based on the rate in Cucuta (Cucuta is a city in Colombia) where the exchange of Colombian pesos, dollars and Bolivares is done in a free manner based on supply and demand. Also, you should know that DolarToday does not sell or buy the dollar.