“Barter” reads a simple sign on Angelica Monasterios’s stall in Cupira, a town on the main road east from Caracas. Her niece painted the sign for her in early February, after spiralling inflation and vanishing reserves of hard cash made it hard to do business.
“We accept dollars and euros as well,” she said with a grin, sitting beside rows of handmade yucca wafers, the town’s speciality, balls of pure cacao farmed nearby and hand-carved toys.
Venezuela has the world’s largest oil reserves, and was once one of the wealthiest countries in Latin America, but its economy has been ravaged by years of runaway inflation. The devastating blackout that struck last week has pushed it to the verge of collapse.
Venezuela officially entered hyperinflation at the end of 2016, and has now endured one of the longest runs of warp-speed price rises in the world, according to Steve Hanke, a professor of applied economics at Johns Hopkins University and one of the world’s leading experts on the phenomenon.
Hanke has logged 58 historical episodes of hyperinflation around the world, and says Venezuela’s is the fourth longest, though nearer the median for rate of price rises. That does not mean an end is in sight. The longest episode Hanke has recorded, in Nicaragua about three decades ago, lasted nearly five years.
The cliched image of hyperinflation is of people rushing to the shops with cash in wheelbarrows. In Venezuela, however, while the value of money crashes, so does the ability to get your hands on it.
Bolívar banknotes are increasingly scarce, probably because cash itself is one of the many things Venezuela is struggling to pay for. The government’s mint no longer works, so it gets banknotes from abroad, and manufacturers expect to be paid in something other than the fast-devaluing notes they produce.
There are a few things in Venezuela for which cash is indispensable, such as bus fares and supplies in very remote areas, but for almost everything else people have found a workaround.
Venezuelans are using barter, dollars and – when the power supply allows – online transfers, debit cards and even cryptocurrencies to scrape together what they need to survive. They can sometimes go for weeks without touching banknotes.
Before the power cut, most people in urban areas relied on online transfers and debit cards to make payments, leaving anyone without a card or internet banking dangerously vulnerable.
Gindel Delgado spent two months excluded from the system, spending all his spare time on Kafkaesque efforts to be able to use money again. He needed a new bank card to access his account, but a shortage of plastic meant his bank refused to issue one.
His salary was paid into his father’s bank account, and the pair sat down every evening to make a list of online transfers to people he owed money to.
“I gave up until I had a week off work,” Delgado said of his long quest to get a new card. He spent that week trekking from branch to branch to find someone who could finally issue him a new card.
Thursday’s devastating blackout – which still afflicts much of the country – has only accelerated Venezuela’s creeping unofficial dollarisation.
With ATMs and card-readers rendered useless, many hotels and shops now only accept dollars. At a supermarket in the wealthy Chacao district, security guards turned away customers without US currency to pay with.
“All this government talk of American imperialism and now we have to use dollars,” said Celina Bareto, whose daughter was inside buying vegetables with the few dollar bills she had lying around the house.
Others without dollars were not so lucky. “I have some dollars saved at home,” said Trina Cedeño, a publicist looking to buy food for her husband and their toddler. “But I was saving them for emergencies, not to buy groceries.”
One butcher in central Caracas said he now makes up to 10% of his sales in dollars, even though they are not technically legal tender. Much of that is from bulk purchases by Venezuelans abroad supporting family back home, but some is cash.
Inflation has made it hard to break even, even with dollars. “Sometimes I will buy a kilo of meat at 10,000 bolívars, sell it in the shop for 14,000, then go back to restock and the wholesale cost is 15,000,” he said. “You can’t keep going like that.”
The scale of price increases is a problem even for economists who want to study them, because systems for measuring inflation in a normal economy stop working as costs spiral, Hanke said.
People’s spending priorities shift toward food and other basic necessities as their salaries lose value, so the basket of goods used to calculate inflation, which in the UK includes everything from quiche to sports leggings, becomes less relevant.
Economists would also conventionally spend several days putting together an index of prices, but in Venezuela these are creeping up every day.
“In the normal environment it doesn’t matter if they measure the prices of bread in the beginning, middle or end of the month. With hyperinflation, you’d have to measure them all simultaneously on the same day,” Hanke said. “It becomes almost unfeasible to do it.”
He believes the best way to measure the true level of inflation is to look at the foreign exchange rate, because that now is the basis of the economy. Even prices quoted in bolívars are based on an assessment of the black market exchange rate, he said.
Hanke said: “The measuring rod has already been changed to the US dollar.” The only way out for Venezuela, whether under the government of Nicolas Maduro or his challenger Juan Guaidó, will be making that unofficial measuring rod official, he said.
That could either be by overt dollarisation, or pegging the bolívar securely to another country’s money with hard currency reserves backing every note issued.
“There usually is some end point [to hyperinflation] because one of two things happens. You get a political change, and then you get a currency reform. Or you get the same guy in power and you get a currency reform.”