Due to the price and exchange control policies, expropriations, and radical statism that, together with the greatest corruption in history, Venezuela has been experiencing the collapse of the economy and public services. Transforming Venezuela into the poorest and most unequal country on the continent. Generating an interannual inflation of 2,295,981%. Hyperinflation eradicates the bolivar, which has ceased to be a benchmark of value and has lost 16 zeros since Hugo Chávez came to power in 1999.
Due to this economic phenomenon, the approval of the use of foreign currency (Mainly US dollars) came to Venezuela. This opened the way for businesses to begin accepting foreign currency as a means of payment without fear of being sanctioned. With the hyperinflation, many people preferred to use it because the government had begun to restore the number of bolivares in the economy. Now the supermarkets and clothing stores now mark their prices in dollars. Merchants use cash and other foreign currency financial instruments to collect from customers.
There is a lot of uncertainty about how this tax will be applied to Venezuelan companies, especially what is considered payment in foreign currency. As Venezuela is an informally dollarized economy, this phenomenon is merely transactional.
This dollarization has several characteristics:
- De facto, since it was not part of a formal government strategy but was assumed by the Venezuelans themselves.
- The bolívar has not been eliminated by the dollar, no matter how devalued it may be. And that is why analysts say that dollarization is partial.
September inflation in 2021 was 7.1%, October 6.8%, November 8.4% and December 7.6% according to the same data from the issuing entity. In 2012, it was estimated that transactions in dollars did not reach 5% of the total. Today, it represents almost 70% of operations. The bolívar is used in rare exceptions, such as to pay for public transport. For this the Central Bank recently issued three new banknotes. The maximum denomination, 1 million bolívares. This bill does not even represent 50 cents on the dollar.
At the same time the phenomenon has brought positive consequences to the Venezuelan economy, it has also generated a high margin of inequality. Since access to financial services and businesses is for the small part of the population that has access to foreign currency.
Although President Nicolás Maduro has made it clear that it is not in his plans to adopt the dollar, which, added to the sanctions, locks the doors to a formal dollarization of the economy. Analysts consider that this process is unstoppable and will not be completely stopped by the entry of new taxes. In addition it will increase informality and the price of products. The future of the Venezuela economy is uncertain, but something sured is that the dollarization process will continue as an effective way to improve transactions.