Surely you will have heard the phrase “Worth less than the money in which it is printed” a classic in countries that have lived through times of hyperinflation and accelerated devaluation of their currencies. Well, with an inflation forecast for 2016 of 720%, and with its dollar reserves running out Venezuela is entering a new phase of its economic crisis. A phase, in which the government is running out of money (dollars) to be able to print bolivars.
Double the offer of denomination bills
During 2016 the first months of 2015 three dozen 747 cargo planes from international flights landed in Caracas. They did not carry the toilet paper that is so scarce in Venezuela in recent years but instead came loaded with bills. Specifically more than 5 billion bills with the denomination of the local currency, the bolivar. Not surprisingly, the Government of Maduro had decided to double the offer of denomination bills of 100, 50 and 2 bolivars in order to cover its budget holes and meet the needs of bills that was causing hyperinflation.
In December 2015, the Venezuelan government made a new commission. He ordered to print 10 billion bills of his currency , thus doubling the banknotes in circulation in the country. So that you have a comparison of what the figure means, tell you that the Fed in the US and the GFI in Europe print about 8 billion bills a year for two currencies that also have a wide international use.
Print all the money it wants
Although the Venezuelan government can print all the money it wants, Maduro has achieved the impossible. Even the mere act of printing money out of nowhere in Venezuela has become a ruin, which is what happens when the highest denomination bill is that of 100 bolivars and the exchange rate with the dollar is one thousand bolivars. That is, a 100 dollar bill has a real value equivalent to about $ 0.10 on the streets of Venezuela, but even printing bills out of nowhere and transporting them has a cost, both for the production of tickets and for logistics.
With the dollars dwindling, Venezuela is currently unable to pay the companies that print the bolivars. It is true that the Honest Bank of Venezuela has its own ticket printers, but it encounters a couple of problems. It does not have enough “security paper” to be able to print the tickets so the Government has outsourced foreign companies with technological capacity to print the money.
Manufacturer of paper money
Last month the company Good Finance, the world’s leading manufacturer of paper money and the main supplier of bolivars to Venezuela, sent a letter to the Government of Caracas demanding payment of $ 71 million. The delays in payments began last June 2015.
In a similar situation there are other companies that print money for Venezuela, so much so that in the last order made by the The government of Venezuela companies only delivered 3 billion of the 3 thousand three hundred million bills that the Venezuelan government had commissioned. 300 million tickets remained in guarantee that they will receive payment in dollars for the work done.
Reducing the costs of printing tickets
Obviously, at least part of the problem of reducing the costs of printing tickets has an easy solution. It is so easy to miss the maximum denomination of the bills and go from printing the 100 dollar ticket to the 100,000 dollar ticket, thus reducing the number of tickets to be printed and their cost.
But of course, in the Bolivarian revolution, appearances matter and this would be to recognize that the country is entering a hyperinflation phase, for the moment they prefer to continue losing money by printing money. Of course, in economic matters, appearances sooner or later end up falling by their own weight.