Grounded Venezuelans May Want to Escape to Bitcoin
Venezuelans are having trouble flying in and out of their country. Spanish discount airline Air Europa has indefinitely stopped taking taking bolivars, the Venezuelan currency, since the Venezuelan government stopped exchanging them for U.S. dollars. ”The reservation people told me that I could buy the ticket in dollars or euros, but not bolivars,” said one stranded passenger. “I’m Venezuelan, and what other money do I have?”
Indeed, around the world, citizens are subject to dictators’ whims by virtue of being forced to use a currency over which leaders have absolute control. Such was the case last year when the government of Cyprus declared an intention to confiscate the contents of Cyprian bank accounts.
What happened next may be instructive for the future. Instead of waiting to be stolen from, people began moving their money to Bitcoin, prompting a boom in prices as demand surged.
Not only does a Bitcoin escape hatch help citizens sidestep oppression, but the knowledge that citizens have that option may be enough to sway some governments away from some of their most onerous schemes. Consider how things might have been different had the citizens of the Weimar Republic or Zimbabwe been able to easily transition to BTC.
Venezuela owes international airlines up to $2.6 billion for bolivars they have turned in to Venezuela’s Cadivi foreign exchange agency. Apparently Venezuela tried offering around $8,000 in free jet fuel, which the airlines refused.
The troubles began when Venezuelan President Nicolas Maduro tightened control of the foreign exchange system in Venezuela in November. He claims his efforts to keep the bolivar valued above its returns on the black market will prevent speculation by those he refers to as the “parasitic bourgeoisie” and those who are waging what he calls an “economic war” against his government.
Inflation in Venezuela has soared to 49% while the bolivar has plunged on the black market to one-sixth of its official value since Maduro came into office power after the late Hugo Chavez in April.
Because the currency is undervalued, the last attempt to get it in line with the dollar led vendors to increase the number of bolivars they charged for their goods. But Maduro is on that. He’s setting up a joint civilian-military task force to force businesses to charge state-approved prices and not hoard scarce goods such as toilet paper and milk.
It’ll be interesting to see how all this shakes out. Things that could hamper a Venezuelan escape to Bitcoin include the fact that, according to the World Bank, in 2012 only 25% of mobile subscriptions in Venezuela include mobile internet. Venezuelans also might have trouble finding people who want to buy bolivars with Bitcoin. However, those with any internet access could exchange goods and services for BTC directly, once enough are obtained.
Regardless, when it comes to inept, out-of-control governments, more options are always better than fewer. Hopefully Bitcoin can offer one more option to the people of Venezuela.