Loose change we can believe in

“If you’re having cash problems I feel bad for you son, I got 99 problems but sencillo ain’t one.”

A couple of weekends ago, I helped a family friend count some money, a little more than 600 Bs. F. For an hour I felt like those money counters that work at Vegas.

You can say that amount is nothing, that it doesn’t even catch up with the minimum wage. But that amount was still very valuable. Why?

It was in coins and small-denomination bills.

For quite some time, the sencillo (as we call here the low-denomination currency) has become a worthy commodity in the street. There’s not much of it, and retail businesses (big and small) are actively looking for it. Every time I go to the market or another kind of store, it ends somehow with the same question at the time of payment: ¿Tiene sencillo?

Some retailers struggle with their lack of sencillo and many customers are not in a better position. ATMs give in most cases brand new banknotes of 100 and 50 Bs.F. Some hold on to their own sencillo, as they believe it’s useful to spend “less” money in the short term while saving more of it in the long term.

A couple of retail employees told me that they have to do many things in order to get some sencillo. The existence of middlemen who get the sencillo for them was implied, but they remained tight-lipped about it. Like a lot of things, it’s done far away from public view.

At the same time, not all sencillo is wanted. The lowest of the low denomination coins (1, 5, and 10 cents) are unwanted by both businesses and customers. When the re-launch of the Bolivar, the most curious aspect was the return of the locha (12 and a half cents), used back in the day and very present in the anecdotes of our grandparents. Now, it’s simply useless as most prices are rounded up, even if the Chavernment doesn’t like that.

Scratch underneath the macro-economic discussion about a new Bolivar devaluation, and you find stories like this which present the true face of our economy and how people must work hard to balance what they have with what they must spend. Even after having enough nickels and dimes, they still have to deal with more problems.

We’re in tough times, and after the holidays are over, they’re gonna get even tougher.

UPDATE: Setty has some very interesting graphics related to this issue in his blog.

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  1. Not long after the reset to the Bs.F., I attended a game between the Leones and Magallanes…an old guy in the crowd was wearing giant neckalces in rolls of the low denomination 60s and 70s notes. There were probably all told a couple of thousand notes…mostly in 5, 10 and 20s. He wasn’t selling them…just cheering for his team in odd neckwear.

    My wife thought it was pretty neat to see the old currency, but I pointed out that it was emblematic of an entirely different problem and reflected an inflationary society and consistently reduced purchasing power. She looked a little baffled at first until I pointed out that while some of the very old dollar bills I have lack the purchasing power they did when they were printed in the 30s and 40s, I could still walk into any store and use them; same with pennies and nickels, even though pennies are now starting to see some rounding if within 1-2 cents of a larger denomination.

    I’ve seen the same thing in Greece and Brazil. The rounding only adds to the inflation issue since everyone receiving the currency, such as merchants, rounds up adding an incremental bump to the price. It seems minimal at first, but the secondary effect is to also habituate those trapped with the currency to always jump to the next denomination everytime which snowballs the whole thing even further.

    Its a vicious cycle…and with the pending devaluation, expect it to accelerate.

    Oh, and I love the lochas…I retained a few and use them as an example of a modern day “piece of eight” in classes.

  2. pitiyanqui: Oh, and I love the lochas…I retained a few and use them as an example of a modern day “piece of eight” in classes.

    Except it’s backwards. A “piece of eight” was a coin worth eight Spanish dollars. The locha is worth one-eighth of a bolivar.

    Odd historical anecdote from the American Civil War: when the Confederate troops entered Pennsylvania in 1863, they went round “buying” up anything they could with Confederate money. One Rebel soldier wrote later that many of the local farmers were in a state of panic, and apparently could not remember any price except “12 1/2 cents”, which they applied to everything. So that amount was a fairly common unit at the time. Never heard of it elsewhere, until this mention of the locha.

  3. I don’t get why the use of intermediaries to get sencillo is done quietly. In Colombia there was a time when Bus drivers needed large amounts of 20pesos coins (I believe the bus fare was set up at 280 so most people paid 300pesos). there you could see a large number of people on the street offering packages of 24 20peso coins for 500pesos.

    Nobody thought twice about it and actually it seemed like a very good service that filled a temporal gap.

    Why do this silently in Venezuela?. All I can imagine is that any financial transaction where the government is not involved is viewed as subversive by it so people try to avoid problems. But perhaps you can give your point of view on how this feels?

    • I agree with you on that theory, JFE: I can already picture the government blaming inflation on the imperialist saboteurs that hoard smaller bills in order to inflict a “financial coup” on Venezuela, yadda yadda yadda… in fact, this exact same thing is what happened a few years ago when personal transactions using foreign currency were outlawed.

      But I can also imagine an issue regarding personal safety: pointing out somebody and saying “I give that person large bills and he/she exchanges them for others of smaller denomination” is the same as saying “that person carries around an indeterminate amount of cash at all times”.

  4. I went today to pay the electric bill: two of them (business accounts), for an amount of Bs 135,04. I handed the cashier 140, and she gave me Bs 4 back. Tell me about rounding.

    The only way you get charged the exact amount is paying with debit card.


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