By Isabel Morales
A few years ago, Venezuela was going through a harsh period of its crisis where its people were forced to stand in lines for hours to buy food and medicine. Now, people see products stocked in stores—but they are not just any type of products, and they are not sold at low prices. Some stores called bodegones are filled with U.S. imported products such as Froot Loops or Oreo cookies that are sold in bolivars and U.S. dollars. The existence of stores and restaurants selling products in dollars is due to the government’s leniency towards economic restrictions and its adoption of a new currency. Though using the dollar as a substitute for the devalued bolivar has proven to help the Venezuelan economy, this change only benefits a small fraction of the country, considering that about 76.6% of Venezuelans living in the country make less than $1.20 a day (Oliveros, 2021). Those that can afford to go to luxury supermarkets, restaurants, and malls are part of Venezuela’s upper class “bubble” (Neuman, 2022).
Inside Venezuela’s bodegones, you can find imported goods that come from popular stores like Costco or Trader Joe’s from the U.S. Venezuelan entrepreneurs and businessmen take advantage of the government’s loose regulations on prices and import controls to buy directly from U.S. stores. However, most of these goods are only accessible to wealthy or upper-class Venezuelans. Some bodegones buy from wholesale importers such as Costco or Walmart, which means they sometimes must raise some products’ prices. For instance, pancake mix for about $6.50 in Costco could cost around $15 in some of Venezuela’s bodegones (Valderrama & Kinosian, 2019). As stated in a New York Times article, a salary of around $120 per month three years ago could have bought three months’ worth of groceries (Glass, 2021). Now, considering weekly wages with the same salary, someone could only buy staple products such as sugar, coffee, milk, bread, cheese, and cooking oil. A carton of a dozen eggs costs around $2.50, a kilo of corn flour to make arepas costs around $1 and ground beef costs $2. For someone who earns a decent salary or lives abroad and goes to Venezuela for vacation might not think it is too expensive, but those that live with a minimum salary cannot afford these products. Additionally, because food is the priority, other types of goods like clothes are now luxury goods (Glass, 2021).
President Maduro’s new strategy involves transmitting socialist ideals to the people while cutting public spending and social programs. However, the government is also taking capitalistic actions by adopting the U.S. dollar, and it is currently used in most places throughout the country. As stated in an article written for The Atlantic, there is a “double-sided irony” to this (Neuman, 2022). First, Maduro has been in a constant battle with the U.S. and has even blamed U.S. sanctions for the country’s demise. Also, U.S. sanctions were instituted to cut Venezuela’s access to dollars by imposing an embargo on the country’s oil sales (Neuman, 2022).
After years of economic contraction, hyperinflation is still high but has dropped in the past year. Analysts also estimate that the country’s GDP will have grown by 2 or 5 percent in 2021 (MRT, 2021). Dollarization has then been a stabilizing factor for Venezuela’s economy in the short term. Many private sector employees are paid in dollars, and those that are still being paid in bolivars have other jobs that pay them in dollars. It has also given informal workers an opportunity to work in the formal economy through platforms such as delivery apps that hire young people without a steady income. Another stabilizing factor is that the government is not limiting the private sector as it was doing in the past. They no longer receive threats against their businesses or price controls that negatively affect the economy (Neuman, 2022).
Though dollarization has pushed the Venezuelan economy towards recovery, it is not strong enough and mainly benefits a small fraction of the population. First, there is no significant shift in the way economic policy and public spending is truly implemented (Oliveros, 2021). Additionally, dollarization will not completely get rid of hyperinflation. The prices of goods are still going up, especially because they are set in dollars. Most Venezuelans cannot afford these luxury products. As a result, dollarization might also be causing an increase in inequality. Though stores are now filled with staple and luxury goods, it does not mean that the economy is stable. For all the Venezuelan population to benefit from dollarization, the country would have to establish the dollar as its main and only currency by reaching a deal with the U.S. federal reserve and having the government lift sanctions (Glass, 2021).
Glass, V. L. (2021, September 9). Opinion | Dollarization Is Helping the Collapsed Venezuelan Economy, for Now. The New York Times. https://www.nytimes.com/2021/09/06/opinion/venezuela-dollarization-maduro-guaido.html
MRT. (2021, November 21). Dollars and elections, the double bubble in Venezuela | International. Market Research Telecast. https://marketresearchtelecast.com/dollars-and-elections-the-double-bubble-in-venezuela-international/208006/
Neuman, W. (2022, January 4). How Venezuela Became One Big Casino. The Atlantic. https://www.theatlantic.com/international/archive/2022/01/dollar-venezuela-economic-collapse-maduro-bolivar-devaluation/621119/
Oliveros, A. (2021, October 14). Dollarization Can’t Save the Venezuelan Economy. Americas Quarterly. https://www.americasquarterly.org/article/dollarization-cant-save-the-venezuelan-economy/#:%7E:text=But%20these%20changes%20are%20limited,history%20of%20the%20Western%20Hemisphere.
Valderrama, S., & Kinosian, S. (2019, December 16). Costco in Caracas: how Florida goods flood Venezuelan stores. Reuters. https://www.reuters.com/article/us-venezuela-shops/costco-in-caracas-how-florida-goods-flood-venezuelan-stores-idUSKBN1YK16X