Financial vs. Formal Dollarization

3개월 전

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The economy of Venezuelan citizens has not only been forcibly alienated by US dollars, but also by currencies from other countries.

In cities in the border states, the use of foreign currencies is a day-to-day situation.

On the border with Colombia, transactions are not only made using dollars but also "Colombian pesos", which has much more strength and monetary value than the Bolivar.

On the southern border of Venezuela, the "Brazilian Real" is very commonly used.

All these coins have served as an alternative to the use of the Bolivar, on the one hand, due to a shortage of physical bills and, on the other, because in practice, the Bolivar has no real value. Even only the paper money material with which the bills are made has more value than the amount that appears printed. Literally.

Will the Bolivar disappear?

The answer to this question is no!.

The administration of the Venezuelan government needs to continue paying the salaries of public workers using Bolívares since its fiscal deficit is enormous and it does not have enough liquid reserves in dollars to cover it.

Venezuela has a deficit fiscal management, which it has to cover with the issuance of bolivars, even knowing that this leads to a new devaluation each time more Bolivars are issued without the support of international reserves.

This fiscal deficit could not be covered if it is fully dollarized, bolivars are needed and that is why it cannot dollarize.
There is no legal framework that establishes the dollar as the currency of lawful use, this would require a series of negotiations and authorizations by the US Government, with which Venezuela has bad relations.

What happens in Venezuela is simply financial dollarization, not formal dollarization. It would be unlikely that the United States Federal Reserve approves formal dollarization in the country given the current conflict with the Nicolás Maduro regime.



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Many Venezuelans dream of dollarization, which if the Ecuadorians achieved, as you say it is impossible, the current government needs the bolivar because every day it devalues ​​and thus manages to pay starvation wages, however a lot of foreign currency is used in the street and it is a measure taken by the people themselves to protect themselves from inflation


Indeed, it's de facto dollarization.

In the day to day I see how in many businesses enter more dollars than the Bolivar, the country is totally flooded with foreign currencies to the point that if you go to ask for a budget for anything you get it in dollars normally, when you enter the business and you see the prices are not in bolivars but in dollars, it's like you say partner the country has a financial dollarization.


Regards dear @roronoa07.
Thanks for commenting.

Wich region of Venezuela do you come from?

Greetings friend @juanmolina

Certainly at the border, the use of foreign currencies such as the Dollar and the Colombian Peso, mark the dominance in the exchanges of purchase and sale of basic products, useful appliances in the homes, and agricultural inputs, this last element is the most disadvantageous, because it increases the price of vegetable and animal raw materials. I live in Santa Bárbara de Zulia, only 2 hours from Norte de Santander - Colombia, and I certify that in this region the Bolivar as a circulating currency has practically disappeared.


Thanks for stopping by.
Regards dear Professor.