The Demise of the Venezuelan Bolívar Continues [Chart]

The Demise of the Venezuelan Bolívar Continues [Chart]

The Demise of the Venezuelan Bolívar Continues [Chart]

The Chart of the Week is a weekly feature in Visual Capitalist on Fridays.

When the price of oil got crushed in mid-2014, there was no doubt that economies heavily reliant on oil exports would feel a pinch. Russia and Venezuela are no exception, and their currencies have been some of the most interesting stories emerging from this new oil price reality.

Russia’s ruble had declined almost 40% against the US dollar over the next six months, only to rebound at the beginning of 2015 along with the price of Brent. Venezuela, which needs to sell oil at $89 to breakeven on their budget, has also seen their currency flop. However, the circumstances are very different.

While the Russian ruble was able to rebound somewhat, the Venezuelan bolívar has continued to depreciate to close to 80% against the USD since the oil price went down the tubes. This is only part of an even bigger decline since Nicolas Maduro took office two years ago, and the oil price isn’t the only thing to blame. The country’s draconian capital flight controls, waning foreign currency reserves, and money printing are also factors.

Of course, news of the struggling bolívar isn’t based on the official information from the Venezuelan government – it comes from the black market rates that citizens pay in a nearby Colombian border town for dollars. The government is currently working to shut down the widely followed website that publishes these rates, known as DolarToday.

In the past two weeks, the decimation of the Venezuelan bolívar has gained even more momentum. It now costs around 400 bolívars to buy $1, when it took about 300 on May 14th. The largest currency note in the country is a 100-bolívar bill, and it is now worth around a mere quarter in US terms. When hyperinflation gains any traction, it can be extremely hard to stop.

Black market bolívars, monetary expansion, and dwindling foreign currency reserves

International companies are beginning to no longer accepting bolívars. Ford announced that it will only accept USD in Venezuela, and American Airlines only allows customers to buy online with dollars.

DolarToday estimates inflation for bolívars at 68.5%, but other calculations have implied inflation as high as 510%.


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