A man counts Venezuelan bolivar banknotes next to US dollar bills in Caracas on August 2, 2018. Venezuela's government on Thursday loosened the tight currency controls it first put in place 15 years ago, with the pro-government Constituent Assembly announcing the passage of a decree authorizing money exchange operations. / AFP PHOTO / Federico PARRA

Venezuelans Know a Dollar Income Ain’t Enough Anymore

Yes, having an income in dollars can go a long way. However, there are plenty of other factors at play in order to make it to the end of the month in this economy. Earning dollars, on its own, just won’t cut it anymore.

Regarding an income in dollars, I dare say 100% of Venezuelans would say:

And though I agree with all of you, I can’t help but wonder about the impact.

We’d be earning close to the same salary we make today, but in greens. If, for example, you earn minimum wage at Bs.S. 4,500, that would come to little under $30 (at Dicom exchange rate of 150 Bs.S./USD). A person can hardly make ends meet with $30, and even if every member in a family of four worked, $120 still comes up short. All of this considering the current price of basic services and gas, which are ridiculously low when compared to international prices.

But why would companies keep on paying the same salaries if they could charge in dollars?

But why would companies keep on paying the same salaries if they could charge in dollars?

Well, for starters, 45% of Venezuelan local industrial companies are producing at less than 20% of their installed capacities, and 37% at less that 40%. And though prices could be set and charged in dollars, price regulations and all other microeconomic constraints for private investment are still in force. Hence, it’ll take some time for companies to increase their production levels and start paying competitive salaries.

As if this weren’t enough (and it should be), at least 70% of our GDP consists of non-tradable services and we have to import most of our intermediate and final goods, which means companies will need a good number of dollars to stock local markets. With the current Venezuelan Investment Law still enforced, international investors won’t be tempted to bring their greenbacks in and over 90% of dollars coming into the country would still be thanks to PDVSA (and whatever parafiscal pot the Maduro government might still have lying around). I dare add: a few, highly risk tolerant investors, might still want to come in to take advantage of lower prices, but sums won’t be game-changing investment.

We all want to earn dollars, but we shouldn’t sell this as the newest silver.

So, even if Venezuelans earn in dollars, it won’t shield them from shortages.

What I mean is that getting a paycheck in dollars will only be saving Venezuelans from the commission of cambistas needed to turn bolivars into a stronger currency, since companies won’t be able to pay better salaries with Venezuela’s local productivity as it is today.

We all want to earn dollars, but we shouldn’t sell this as the newest silver bullet when, by itself, isn’t.