Photo: Runrunes

Remember the Animalitos lottery? Remember the cash crisis in Guayana?

If not, let’s just say rules have changed around here.

Long gone are the days of betting any way you wanted in lottery. Just how markets adapt, lottery has become a convenience more than a distraction: you’re paid in cash only if you bet in cash. If you pay with a card, your earnings will come in transfers. People bet their cash hoping to skip the whole day-long ordeal of lines at the banks. Actually, my “cash guy” sells animalitos too and that’s how he gets it. All of those animalitos stands that spawned around the city have turned into reliable post-modern ATMs.

Now, why do we have a black market of banknotes and why is it this big?

As I said last week, bills are scarce. Everyone knows that this government has printed bolivars like nobody’s business to cover public expenses, but most of that money is created electronically, and only a small part is actually physical.

The proportion of banknotes against the money supply in circulation looks like this:

The money printer can’t keep up with the rate the government needs. In the following graphic you can see the production of new bills. Every September there are peaks in production, but this year fell extremely short. Looks like someone’s having printing issues:

Economist Henkel García argues that it’s not just the bills, but the denominations themselves. We would have enough cash if the BCV just printed the right ones.

Even after delaying a long overdue new coin family, in 2017, the BCV was fixated in printing the lower denomination bills. Print the bigger ones already! They cost the same!

In November, 4% of all money printed was that new and shiny Bs. 100,000 banknote Maduro is so proud of. It doesn’t sound like much, and indeed the 18.4 million bills just meant 0.1% of all bills in circulation. The problem is that the bill is so disproportionately big, that it turned into 30% of all the money out there. Dude: 30% of the value of all of our bills is stored in 0.1% of them.

And it wasn’t practical; stores still refuse to accept it because nobody can give you change for 100,000 bolívares!

Today we have a bunch of really big bills, a lot of the (useless) small ones, and nothing in the middle. Not that it matters much: hyperinflation caught up, and our biggest bill is worth less than half a dollar.

Knowing that they could alleviate the cash crisis without expending an extra dime makes you wonder why they’re going out of their way to make our lives miserable. Is it sheer incompetence or is there some corruption scheme involving printing low bills?

After a riot in San Félix that apparently started when store owners refused to accept Bs. 50 bills, Caroni’s mayor, Tito Oviedo, issued a decree ordering everybody and their mothers to accept all bills. However, in the small shop near my house, where my parents have to buy their drinking water, there’s a sign reading “we can’t accept Bs. 50 bills because they’re incompatible with our system.”

So far, nothing has changed. Life in Ciudad Guayana is all about finding cash now — and I bet we’re not the only ones in this Patria Grande.

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  1. “The problem is that the bill is so disproportionately big, that it turned into 30% of all the money out there. Dude: 30% of the value of all of our bills is stored in 0.1% of them.”

    Holy shit. This fact is a real eye-opener.

  2. Fear not, because soon your largest bill will be the one used to make change for the 500,000 BsF note, which will become change for the 1,000,000 note in about 6 months.

    Its just a waiting game.

    Meanwhile, feel free to use the smaller denominations to wipe your backside.

  3. Just scanning this over (I didn’t do %’s) there appear to be as many $1 bills in circulation as $100’s. The venerable $20 bills are next in popularity. The $50’s, oddly enough, are apparently not very popular in usage. I’m guessing all this correlates to incomes and expenditures, and of course to debit and credit card usage. Again just rough numbers it looks like the number of bills in circulation have doubled (plus a bit) in the last 20 years, and that probably correlates to GDP and also to inflation. Considering inflation, in a way it’s surprising that the $1 bills are still the largest volume; but the % of $100 has increased (e.g. about tripled while the numbers of $1 bills have about doubled).

    Disclaimer: I’m not a licensed number massage therapist.

  4. As bad as it has become, this cash crisis may not be powerful enough. The Cubanoide Narco-Kleptocracy still gets too much cash from Gasoline,oil and drugs sales to the USA, which allows them to survive, give away claps and crap, and pay the corrupt military.

    History proves that desperate dictatorships can survive even hyperinflation. Again, if the disastrous Economic debacle doesn’t get even worse, if the nightmare of 7 more years with the hated Maduro isn’t enough to really piss people off, including a few military, if the blatantly fraudulent election charade isn’t enough, the USA and the EU may have to cut off their cash cows for a little while. That’ll do it, by June.

  5. The 100 bs note is still the workhorse of the cash economy here.

    I just looked through 100 random notes and the latest print date I can find is June of 2015, so unless newer 100 bs notes have been issued and I’m not seeing them, it appears the government last printed these notes for circulation almost 3 years ago.

    They’re aging rapidly.

  6. the USA and the EU may have to cut off their cash cows for a little while. That’ll do it, by June.

    Yep. Might not be any other options to force their hand.

  7. Question for those of you in the know: Does the DolarToday bs. to USD exchange rate reflect a “cash” discount? It would seem there should be two different DT rates: a high one for electronic, and a discounted (50%??) one for cash bills of the sought after denominations?

    • I imagine that like any currency, its value is held at the point of sale. Cash is more valuable to some than others. Expedience is more important sometimes than others.

      I routinely give cash (check, debit, etc) discounts to some of my customers. That way I don’t have to deal with bankers and their slow payouts. (I am a home builder. I have to otherwise wait for 4 installment payments during the construction loan period) It isn’t a “true” cash transaction, but then again most places aren’t Venezuela.

      Interestingly enough, Greece (which is a fiscal mess right now) has a problem with cash transactions. The merchants LOVE to give customers the “cash discount”. You get 30%-50% off… if you pay in cash and don’t need a receipt. No VAT or sales taxes. Then they caterwaul about how there is no revenue coming in for their generous Socialist state payouts when everyone is cheating on their tax bill! (In Greece, its always the “other guys” who are cheating… )

      • Thanks, EG. I get that the value of cash over electronic (or vice versa) will depend on the situation. I’m just wondering how that daily amount that they post is calculated. They take it down to the hundredth. Is currently 255,900.12 (down slightly from Friday). That seems a bit silly. Might as well round to the nearest 1000 bs at the smallest. That will happen eventually.

        Greece is a whole other blog …

  8. I don’t understand the decimal points. 248,774.23.. seriously? Ever heard of “significant figures”? It’s as if DT doesn’t pay attention to reality either.


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