What is the ‘criminal dollar’ and why is it causing new concerns for the Venezuelan economy?

The uncontrolled rise in the value of the dollar with respect to the bolivar in Venezuela has once again set off the alarms of the population and the Venezuelan Government, after the currency presented an unusual behavior in recent weeks.

The situation has generated urgency within the Venezuelan Executive, which has called to “fight the criminal dollar”, that is, the price speculation generated by the uncontrolled increase of the US currency in the domestic market and the disturbances it causes in the economy. .

On this, the Venezuelan president, Nicolás Maduro, asked “take measures in defense of the official rate” of change, in order to face the “disturbance” that carries with it the behavior of the “criminal dollar”.

The Venezuelan president considered that the current behavior of the US currency in the parallel market is due to a “disturbance” encouraged by opposition sectors from abroad, who would seek to sabotage the economy.

“The crime dollar is a surviving instrument of economic warfare to disrupt the lives of Venezuelans. That is why I have called to defend what the official dollar marker is, because it is also a dollar effectively adapted to the economy, the market, realistic, objective and not the criminal dollar that is managed by four mafias from Miami, which intends to harm peace. , tranquility and Christmas to the people of Venezuela,” added Maduro.

“They want prevent Venezuelans from enjoying

Last week, the Executive Vice President and Minister of Economy, Finance and Foreign Trade, Delcy Rodríguez, coincided in accusing the extremist sectors of the opposition of being behind the disturbances in the price of the currency to generate anxiety at the end of the year.

“While they [la oposición extremista] They go to Miami, to Europe, they want to prevent Venezuelans from enjoying their December season (…) They are not new plans, they are mulling over the same perverse criminal idea of ​​attacking our people relentlessly,” added the minister.

Rodriguez compared exchange rate policy figures and the evolution of the foreign currency during the years 2020, 2021 and 2022. From December to November 2020, he said, the dollar increased 22.58 times; while in 2021, after hyperinflation had been overcome, the US currency multiplied 4.23 times.

Now in 2022, a year described by the Venezuelan government as one of “economic prosperity”, the foreign currency remained more stable and until November it registered an increase of 2.38 times its value.

“It would be less, as the President has said, if this disturbance had not appeared in the context of overheated trade,” explained Rodríguez, adding that in these last months of the year The Venezuelan economy shows great activity commercial which is perceived in “astronomical numbers” registered in electronic payment channels, which went from averaging 100,000 transactions per minute to 700,000 on a weekend.

In this seasonal context, of an overheated trade that accompanies this Christmas, the perverse plans emerged again through the criminal dollar,” the vice president pointed out.

Why is there fear?

The sudden upward behavior of the dollar reminds the population of the worst moment of hyperinflation that Venezuela experienced until a couple of years ago, when it rose Forex exponential became the main concern from the country.

At that time, the price skyrocketed, causing prices to rise in just hours and an aggressive impact on the economy.

The hyperinflationary cyclewhich lasted for some five years, generated a deep economic, political and social crisis, which finally slowed down in recent months with the relative stabilization of the daily price of the dollar.

But as of the last quarter of 2022, above all since the end of octoberwhen the foreign currency began to have an irregular upward trend, the calm that had spread regarding the dollar phenomenon has been broken again.

The most worrying streak was recorded from the end of November and during the first week of December, when the price of the dollar, especially in the so-called parallel market, doubled in just daysgoing from an average of 9 bolivars per dollar to almost 20. While the exchange rate published by the Central Bank of Venezuela (BCV), which is an average of the operations at the banks’ exchange desks, jumped from the 8 bolivars to a little more than 15.

The uncontrolled rise of the dollar began to cause alarm in the population, since the merchants began —again— to speculate with overprices in products, an action they say they resort to to protect themselves from excessive devaluation and avoid loss of income.

The dynamic caused a large number of businesses to start executing illegal practices such as not accept bolivars and limit sales to dollars. Similarly, the digital platforms of the banks, where account holders can buy dollars via the Internet, were suspended and disabled.

What’s behind?

The evaluation of different economists is that the value of the dollar skyrocketed because two elements that play against: the demand for foreign currency and the excess of bolivars in the domestic market.

The first of them talks about the need for dollars in the Venezuelan market, which is still are in short supply in the country due to the economic blockade imposed against Caracas by the US and the European Union (EU). The currency is demanded both by merchants and by a sector of the population that seeks to have savings and overcome the impact of the devaluation of the bolivar.

As of the last quarter of the year, the Venezuelan Executive began to pay profits to public workers, pensioners, and retirees, which would have produced a excess bolivars in the domestic market and the demand for dollars skyrocketed.

This economic situation caused the so-called “aguinaldos” paid in bolivars, and which in most cases translate into the collection of three months’ salary, they will depreciate up to half in just a couple of months.

For example, the amounts collected by state employees that at the exchange rate in October were equivalent to 60 dollars, with the rise in currency and the devaluation of the bolivar, currently represent about 30 dollars.

Given this, the Government took measures to curb the price of foreign currency and the disturbances it brings to the national economy.

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Last Friday the BCV intervened in the exchange market with 180 million dollars. The measure, which was given just after the last payment of the Christmas bonuses, serves to meet the high demand and stabilize the currency’s uptrend.

In addition, immediately, the call parallel dollar – reference used for retail exchange and informal trade– it has started to drop and is located at 17.82; while the purchase of currency on digital platforms was reactivated by official price, which is about 16.00 bolivars. Although, for now, the situation seems contained, the alerts are already activated.

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