Where have all the dollars gone?


Reading the Venezuelan press, it’s easy to forget this is a petro-state, and that the barrel of oil is selling at prices close to its historic high.

Just today, we found out that

To put it all in perspective, Últimas Noticias has an excellent story about the day-to-day struggle of poor Venezuelans to find the things they need. One of several money quotes:

“Approximately a year ago, María Rodríguez and her husband stopped selling basic staples from their little shop, located in a small terrace in Mamera, a poor neighborhood up the hill from the Antímano boulevard, in western Caracas. “Everything has gotten really difficult [to obtain]. It’s not even worth it to go to wholesalers in Quinta Crespo or the La Yaguara Makro because, besides having to stand in line and pay for transportation, they don’t let you buy wholesale, you can only take two or four packages per person. That is only good for us, but not for reselling. Now, we just get by through selling junk food such as candy and chocolates (which we get from a local wholesaler), root beer, and soda, which distributors continue bringing us.”

The same story also repeats the much-vaunted line about how Venezuelans are consuming more calories than ever before. Of course, if you can’t buy chicken or flour, and instead you have to consume Torontos and Maltín Polar, you caloric intake is going to go up – way up! But is that a good thing? It’s no wonder there is one ranking where we are doing exceedingly well – obesity rankings.

This confirms the anecdotes we have been hearing about: in the first few months of the year, the supply of currency in the economy dried up almost completely. We were even hearing about how activity in our major ports was down to a trickle. Scarcity is simply the end product of a decision made by someone, somewhere, to simply shut down the supply of dollars.

Typically we try to explain this several ways: it’s the Cuban subsidies, or the boligarchs that are stealing the country’s money, or the fire in Amuay that is forcing us to import everything, or the sales in advance to China.

Me? I think it’s all of this, and then some. And while some people think the worse may be over, I have my doubts.

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  1. Agreed. Its not casual and not improvisation, nor chance ; mala leche!

    the scarcity and devaluation, and inflation and eventual starvation/ empty caloric intake are IMO POLITICAS DE ESTADO.

    By action or omission, the resulting effects are now to be seen and experienced.

    Who benefits? cui Prodest?
    Its always wise to run this test.

    Who benefits from undernourished people, busy all the time on a line to beg for government crumbs?

    A progressive government, bent on the welfare of the PUEBLO?
    …or a invasion force, careful to prevent uprising and resistance.

    Por sus actos los conocereis….

  2. Whats surprising is how little anyone knows about where all the dollars from Venezuelan oil exports have gone , there is more than one sieve .
    1. Payment of Chinese Loans via transfer of income on future oil shipments to Chinese banks.
    2. Payment of interest and capital on international bonds issued by Govt and Pdvsa
    3. Cost of underwriting the unpaid portion of the price of oil supplies to Petrocaribe and other friendly countries .
    4. Higher cost of goods and services purchased from priviledged (e.g.mainly chinese) suppliers of goods and services ,
    5, Cost of graft bribes and ‘comissions’ paid to govt officials and regime connected business partners of the latter., Overinvoices of govt purchases or purchases generally funded by the govt .
    6. Need to substitute with imports production previously produced in Venezuela , including gasoline components from the US (previously produced in Pdvsa refineries,, food stapples of all kinds , iron and metal products previously produced by CVG or independent companies , of cement previously produced by Privately owned Cement Companies.etc. .
    8.. Rising prices in international markets of some of the above imports .
    9. Higher production and operating costs inside Pdvsa due to increased mismanagement of existing oil resources requiring import of more services and equipment , need to spend on special projects to keep declining oil fields from losing all of their production . Production of more low priced more expensive to produce extra heavy crudes to substitute declining production of lighter crudes.
    10. Maintaining production of oil destined to produce more refined products for domestic market practically at no cost to purchasers , subsidization of oil products smuggled to neightboring Colombia .

    Wonder if there is a way of putting a credible number beside each of the above sieves.

    • Yes. I dont think there is any need to find out a particular new or devious way for the money to disappear. Is just that at any point in the system of pipes, it leaks, a lot. Not to mention whole pipes that are built precisely to waste money.

      • Sorry Jesus however well said, what you mention is still to broad and vague for me , I d like some hard numbers , I m curious to know specifically how the money we used to get and spend from selling the countries oil in past year is suddenly gone, where specifically its dissapeared to . Not to blame anybody but simply to know and understand . Also because I figure that knowing those numbers might allow us to visualize how to get out of this mess. !!.

        • Bill,

          Exactly how much? It would require an army of forensic accountants years, and the exact numbers may still never be known.

          • Roy .Some patient researchers have done it in the past , piecing the information together from different sources . the figures of course are sometimes difficult to find but there are clever people who are really good at this . I would refer you to the studies of people like IESA’s Miguel Angel Santos whose blog I heartily recommend you to visit . Maybe some of the details are missing but the picture comes out clear enough.!!

  3. “Somehow it seemed as though the farm had grown richer without making the animals themselves any richer — except, of course, for the pigs and the dogs.” — Animal Farm

  4. I wondered which MNC would buckle first and accept reality. I’ve mentioned before that it behooves the companies that will not be getting their CADIVI rate to hang on to reporting that CADIVI rate as long as is humanly possible.

    Brink’s was the first to make the jump. And, if you look at their intraday trading under the ticker symbol ( BCO ), you’ll see why none of the publicly traded companies want to fess up to the 50+ bolivars per dollar instead of the 6.3. But hey, what’s a one day drop of 11+% to shareholders, right?

    This hit the newswire after trading closed for the day yesterday. Notice in particular the restatement of revenues in LatAm for 2013 a bit down in the charts. I think its cute they had initially allowed for a devaluation from 5.3 to 6.3 earlier in the year.

    Bloomberg had a slightly different take:

    “These companies that are booking fictional profits are going to actually start generating losses,” Yaron Reuven, president of Reuven Capital Investments LP, said in an interview. “Those bolivars are useless.”

    But, at least Brink’s is being honest, perhaps the most of any of the MNCs in Venezuela:
    Brink’s is the first company to adopt Sicad II for first-quarter earnings, according to filings compiled by Bloomberg. While Procter & Gamble Co., Colgate-Palmolive Co. and Telefonica SA (TEF) have said they would adopt a separate currency system called Sicad I, which was created last year for importers of non-essential products and closed at 10 per dollar yesterday, Brink’s said it didn’t anticipate being able to buy dollars in that market.

    So, 1) this will now put that much more pressure on MNCs in Venezuela to cease/liquidate operations in the country which will certainly help with scarcity/productivity. 2) this will certainly not be of help to investor confidence in bonds, although in the short term, they might be happy since the government is conserving its dollars for them and screwing everyone else.

  5. The regime has pulled the greatest dissapearance act in the history of political magical theatre , how do you dissappear close to 90 billion USD without leaving a trace ??, money which was being spent by the fistfull only a year ago ?? where did it all go ??

    Moreover theyve pulled it while pretending its all still there .!! despite no one believing it .!!

  6. As I said: one of the reasons that accelerated the anger and the guarimbas were the ever longer queues of street vendors in better-off areas to buy more stuff. This was happening all over Venezuela’s major cities. And I saw this was an unsustainable process bound to collapse. I was hoping for the street vendors to finally protest – if they found a proper representative – but instead the guarimbas came from people who were affected by these queues.

    Then many street vendors were rather mad at the guarimberos. People – those with the proper education and vision – should have tried to have both groups join causes but that is only possible if you explain people what’s happening with the economy.

    I believe the level of informal economy must be higher than what the INE says. And I believe the type of things people considered “trabajadores informales” has been changing a lot for the worse.

    But we do not have numbers, only impressions and a government dominated by Cuban interests and stupid military and just inept people won’t help us there.

  7. math 101…PDEVESA buyers get kickbacks for awarding ridiculous high bids making a few people ultra rich. The Bolivarian Revolution is nothing but a smokescreen to amass wealth by those controlling the checkbook in the name of social justice.

  8. Bolivarian logic: In order to siphon funds for the corrupt, you create smokescreens, the primary one focused on “we-feel-for-you-my-poor-people”; you mismanage the economy; you construct barriers to necessary goods, and in the process, long, dehumanizing line ups so as to make people passive and submissive; before raising prices of essential goods and services.

    One measly case in point:
    Alberto Ravell ‏@AlbertoRavell
    Aprueban aumento de 44% en el pasaje de transporte publico en Maracaibo.


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