(Bloomberg) -- Venezuelans working through their Christmas shopping lists at malls and neighborhood markets are increasingly being forced to pay in U.S. dollars.
While imports such as car parts and electronics have been long been priced in greenbacks -- even though it’s against the law -- the massive depreciation of the Venezuelan bolivar and skyrocketing inflation are pushing even small shop owners to now demand foreign currency for nearly everything they offer. Tomomi Nakada, who sells imported sportswear at holiday bazaars around Caracas, began pricing all of her goods in dollars this year.
“If I still charged in bolivars, I wouldn’t make enough to cover the costs,” said Nakada, whose sells sets of trendy gym clothes for about $45. “I’m constantly affected by the devaluation.”
Walking around a popular Christmas market in Caracas on a December weekend and you can find craft jewelry, German fruit cakes and hand-sewn clothes -- all quoted in dollars. It’s a puzzling situation in a country where most people can only acquire foreign currency through the black market, where $1 costs 120,000 bolivars. The monthly minimum wage is about 180,000 bolivars.
The meltdown in Venezuela’s currency has deepened in 2017 as the country and its state oil company blow through grace periods for their debt, leading credit rating firms to downgrade some of their bonds to default territory, amid U.S. sanctions against the government for what critics see as an increasingly anti-democratic turn. With the economy forecast to contract 12 percent, the dollar has gained 3,500 percent just his year against the bolivar, according to dolartoday.com, a website that tracks the rate.
Inflation running at an annual pace of more than 7,000 percent over the past six months, according to Bloomberg’s Cafe Con Leche Index, is only adding to the misery.
“This phenomenon is the only way to keep businesses sustainable,” said Henkel Garcia, director of the Caracas consultancy Econometrica. Even vendors who don’t price their goods in dollars often raise the price in bolivars on a day-to-day basis to reflect the latest black-market rate, he said.
A family now requires 21.5 minimum wages just to cover their basic food expenses. Even after the wage was recently increased 30 percent, the purchasing power of Venezuelans is at the lowest level in 19 years, according to data by Caracas research group Cenda released this week.
“November and December used to be my best months of sales,” said Nakada, who encouraged buyers with raffles and a 15 percent discount. “Now no one is shopping.”
©2017 Bloomberg L.P.