Maduro government turns to stealing currency from its impoverished citizens.
December 21, 2016
'Tis the season to be jolly, and for Venezuela's bumbling socialist government this means fighting hyperinflation by essentially stealing currency from its impoverished population and, at the same time, handing out free Christmas toys – toys stolen from retailers in the oil-rich yet impoverished South American nation.
The toy giveaway was targeted at the usual enemies of Venezuela's socialist project: greedy merchants who were supposedly “hoarding” toys to jack up their prices. The Robin Hood-style initiative, however, was not enough to tamp down a social uprising and widespread looting over the weekend triggered by President Nicholas Maduro's bumbling efforts to cope with hyperinflation. Last week, President Maduro issued a royal edict: Venezuelans had 72-hours to turn in the country's largest banknote, the 100 Bolivar bill -- now worth only 2 U.S. cents. Long lines formed at banks where Venezuelans had expected to exchange the notes for new bills with larger denominations. But as it turned out, larger banknotes were unavailable -- so when the 72-hour deadline expired to turn in the bills, Venezuelans suddenly found themselves holding totally worthless currency: banks couldn't exchange it and retailers wouldn't accept it. It was a theft on par with Cuba's confiscation of businesses in the name of socialist social justice.
That's when all hell broke loose. Hundreds of banks and stores were looted or vandalized in what witnesses called scenes of anarchy. Some of the worst looting -- according to accounts in mainstream media outlets and social media -- occurred in El Callao and Ciudad Bolivar, cities in the southern state of Bolivar named after Venezuelan independence hero Simón Bolivar. Business groups reported some 350 businesses were ransacked, including 90 percent of food outlets. Stores owned by Chinese merchants were targeted. Police reportedly arrested more than 300 people, including leaders of opposition parties. Speaking on state television, President Maduro declared: "Don't come and tell me they are political prisoners ... They are the two parties of the 'gringos' in Venezuela."
As the looting spread, President Maduro backed down and issued a new edict: the $100 Bolivar bill would be good after all, at least for the time being. But according to some reports, many merchants were unwilling to accept them, leaving Venezuelans with few options in the run-up to Christmas. Some Venezuelans nevertheless tweeted a novel solution for what to do with the currency – and that was to use the 100 Bolivar notes as toilet paper. Toilet paper is among the basic goods in short supply in Venezuela along with food and medicines.
The sacking of food outlets was understandable, to be sure, in light of severe food shortages along with virtually worthless currency – a calamity rightly blamed on bumbling command-and-control economic planning: draconian currency exchange and price controls; and widespread nationalizations.
Maduro, a bus driver turned politician who now follows Cuba's play book, was the hand-picked successor of the late Hugo Chávez, Venezuela's firebrand socialist president. He has good reasons to phase out the 100 Bolivar note and issue higher denomination bills. Hyperinflation – the worst symptom of a sick and mismanaged economy – has officially arrived in Venezuela. “On December 3, 2016, Venezuela’s inflation met all the criteria required to qualify as a hyperinflation,” observed a paper by economists Steve H. Hanke and Charles Bushnell. “Specifically, Venezuela’s monthly inflation rate exceeded 50 percent per month for 30 consecutive days.”
Venezuela's economy -- now the region's worst performing -- is expected to contract 8 percent this year, and inflation is expected to hit 720 percent as the government feverishly prints more and more worthless currency. Next year's inflation is set to hit 2,200 percent, according to an IMF report that the international lender recently issued amid Venezuela's ongoing calamities.
Hugo Chávez, ironically, had won the presidency in a landslide by promising to redistribute Venezuela's wealth, eliminate endemic corruption, and reverse declining living standards. But what Chavez had called “21st century socialism” has instead brought the South American nation to failed-nation status. A country blessed with abundant natural resources now looks a lot like Haiti.
President Maduro, who has Cuban advisers whispering in his ear, has brought Venezuela to its knees by double downing on Chávez's statitism, authoritarianism, and bread-and-circuses populism – all things with a long history in Venezuela dating to long before Hugo Chavez had promised to take Venezuela toward the same “sea of happiness” as Cuba. Cuba has had an formidable influence in Venezuela, providing political counsel, intelligence agents, and enjoying sweetheart deals that have brought it cheap oil. Venezuela's leftist leaders, for their part, blame the economic crisis and shortages on an “economic war” being waged by opposition leaders, business owners, black marketeers, and foreign enemies that include the United States.
The anarchy gripping Venezuela comes as the U.S. State Department issued a travel warning advising against travel there. Citing one of the world's highest crime rates along with shortages of food and civil unrest, the warning explained: "Violent crime - including murder, armed robbery, kidnapping, and carjacking - is endemic throughout the country. Armed robberies and street crime take place throughout Caracas and other cities, including in areas frequented by tourists. Heavily armed criminals are known to use grenades and assault rifles to commit crimes at banks, shopping malls, public transportation stations, and universities. Criminals may take advantage of power outages to target victims when lights and security alarms are nonfunctional. Drug traffickers and illegal armed groups are active in the Colombian border states of Zulia, Tachira, and Apure."
Venezuela's misery is yet another example of socialist regimes that turned into a living hell. The humanitarian crisis now unfolding will pose a vexing problem for the incoming administration of President-elect Donald Trump.
David Paulin, an Austin, TX-based freelance journalist, covered Hugo Chavez's rise to power while based in Caracas as a foreign correspondent. He also reported from the Caribbean while based in Kingston, Jamaica.