What is the ‘criminal dollar’ and why do people worry about this in Venezuela?

The uncontrolled rise in the value of the dollar with respect to the bolivar in Venezuela has once again set off the alarms of the population and the Venezuelan Government, after the currency presented an unusual behavior in recent weeks.

The situation has generated an atmosphere of urgency within the Venezuelan Executive, which has called to «fight the criminal dollar», that is, the price speculation generated by the uncontrolled increase of the US currency in the domestic market and the disturbances it causes in the economy. .

On this, the Venezuelan president, Nicolás Maduro, said that measures have to be taken, «in defense of the official exchange rate», in order to face the «disturbances» that are caused by the behavior of the «criminal dollar», reports RT.

The Venezuelan president considered that the current behavior of the US currency in the parallel market is due to a «disturbance» encouraged by opposition sectors from abroad, which would seek to sabotage the economy.

“The criminal dollar is a surviving instrument of the economic war to disrupt the lives of Venezuelans. That is why I have called to defend what the official dollar marker is, because it is also a dollar (the official) effectively adapted to the economy, the market, realistic, objective and not the criminal dollar that is managed by four mafias from Miami, which intends to harm the peace, the tranquility and Christmas for the people of Venezuela», added Maduro.»They want to prevent Venezuelans from enjoying themselves»

Last week, the Executive Vice President and Minister of Economy, Finance and Foreign Trade, Delcy Rodríguez, also accused the extremist sectors of the opposition of being behind the disturbances in the currency price to generate anxiety at the end of the year.

«While they [the extremist opposition] go to Miami, to Europe, they want to prevent Venezuelans from enjoying their Christmas season (…) These are not new plans, they are mulling over the same perverse criminal idea of relentlessly attacking our people», added the minister.

Rodríguez compared the exchange rate policy figures and the evolution of the foreign currency during the years 2020, 2021 and 2022. From December to November 2020 – she said – the dollar increased 22.58 times; while in 2021, after hyperinflation had been overcome, the US currency only multiplied 4.23 times.

Now in 2022, a year described by the Venezuelan government as one of «economic prosperity», the foreign currency remained more stable and until November it registered an increase of 2.38 times its value.

«It would be less, as the President has said, if this disturbance had not appeared in the context of overheated trade», explained Rodríguez, adding that in these last months of the year the Venezuelan economy shows great commercial activity that is perceived in «astronomical numbers” registered in electronic payment channels, which went from averaging 100,000 transactions per minute to 700,000 in a weekend.

«In this seasonal context, from an overheated trade that accompanies this Christmas, the perverse plans emerged again, through the criminal dollar», pointed out the vice president.Why is there fear of the dollar?

The sudden upward behavior of the dollar reminds the population of the worst moment of hyperinflation that Venezuela experienced until a couple of years ago, when the exponential rise of the currency became the country’s main concern.

At that time, the price of the dollar skyrocketed, causing general prices of products and services to rise in just hours and an aggressive impact on the economy.

The hyperinflationary cycle, which lasted for about five years, generated a deep economic, political and social crisis, which finally slowed down in recent months with the relative stabilization of the daily price of the dollar.

But as of the last quarter of 2022, especially since the end of October, when the foreign currency began to have an irregular upward trend, the calm that had spread regarding the dollar phenomenon has been broken again.

The most worrying streak was recorded from the end of November and during the first week of December, when the price of the dollar, especially in the so-called parallel market, doubled in just days, going from an average of 9 bolivars per dollar to almost 20. While the exchange rate published by the Central Bank of Venezuela (BCV), which is an average of the operations at the banks’ exchange tables, jumped from 8 bolivars to a little more than 15.

The uncontrolled rise of the dollar began to cause alarm in the population, since the merchants began —again— to speculate with overprices in products. The merchants say they resort to this action to protect themselves from excessive devaluation and avoid loss of income.

The dynamic caused a large number of businesses to begin to carry out illegal practices such as not accepting bolivars and limiting sales to dollars. Similarly, the digital platforms of the banks, where account holders can buy dollars via the Internet, were suspended and disabled.What’s behind all this?

The evaluation of different economists is that the value of the dollar skyrocketed because two elements rose that play against it: the demand for foreign currency and the excess of bolivars in the domestic market.

The first of them talks about the need for dollars in the Venezuelan market, which are still in short supply in the country due to the economic blockade imposed against Caracas by the US and the European Union (EU). The currency is demanded both by merchants and by a sector of the population that seeks to have savings and overcome the impact of the devaluation of the bolivar.

As of the last quarter of the year, the Venezuelan Executive began to pay utilities to public workers, pensioners, and retirees, which would have produced an excess of bolivars in the domestic market and triggered the demand for dollars.

This economic situation caused the so-called «aguinaldos» (christmas bonuses) paid in bolivars, and which in most cases translate into the collection of three months’ salary, were devalued by up to half in just a couple of months.

For example, the amounts collected by State employees that at the exchange rate in October were equivalent to 60 dollars, with the rise in currency and the devaluation of the bolivar, currently represent about 30 dollars.

Given this, the Government took measures to curb the price of foreign currency and the disturbances it brings to the national economy.

Last Friday the BCV intervened in the exchange market with 180 million dollars. The measure, which was given just after the last Christmas bonus payment, serves to meet the high demand and stabilize the upward trend of the currency.

In addition, immediately, the so-called parallel dollar – reference used for retail exchange and informal trade – has begun to fall and is located at 17.82; while the purchase of foreign currency on digital platforms was reactivated at the official price, which is over 16.00 bolivars. Although, for now, the situation seems contained, the alerts are already activated.