The extent of the inflation crisis in Venezuela has led to people to make origami objects out of 2, 5 and 100 bolivares bank notes as they are worth more sold as souvenir items than their face value. The free market exchange rate is 3.5 million bolivares = 1US$.
Venezuela’s problems started when oil prices collapsed – 95% of Venezuela’s export revenue is from oil. With falling oil revenue and therefore foreign currency the government has less money to buy imports. The inflation figure is due to hit 1,000,000% by the end of the year and this has been mainly caused by the printing of money to finance the deficit which amounts to 30% of GDP. But there is another problem in that they don’t have enough bank notes to go around. Like a lot of things in Venezuela bank notes are imported and the central bank printer produces less than 5% of cash in circulation. Since 2016 there have been major problems with note denominations.
December 2016 – President Maduro decrees that 100 Bolivar note will be withdrawn from circulation but the larger denominations never turned up. 500-bolivar notes turn up on emergency flights but too few came and inflation had eroded the value to 20 cents.
November 2017 – 100,000 bolivar notes arrive but not enough too meet demand. Traders sell bundles of assorted banknotes for up to three times their face value – needed for small budget items such as bus fares, coffee etc.
Much of the economy runs on debit cards and bank transfers but the checkout computers cannot cope with such large denominations. Maduro’s solution here was to create a ‘sovereign bolivar’ worth a thousand times more and it will fit more easily on screens. However this will do nothing for the stemming inflation. But again they place the order with the printers too late and they will be nearly worthless when they arrive. However the overseas printers are doing well out of it.
Below is a very informative video from CNN about the on-going crisis.