Venezuela's economic crisis has stretched into 2018 after government forces forcefully quashed protests against President Nicolas Maduro's government last year, killing at least 120 in the process. In recent weeks, the black market exchange rate — far more trusted than the government's laughably rosy official rate of 10 Venezuelan bolivars for one U.S. dollar — has spiraled out of control, recently topping 200,000 bolivars for a dollar, per DolarToday.
Why it matters: The crippling economic forces that spurred last year's protests against the Maduro regime have accelerated, and many ordinary Venezuelans not only can't afford food but also often don't have the cash to pay for it.
For normal Venezuelans, the country's hyperinflation takes an exacting toll on daily life. Per a report from CNN Money's Stefano Pozzebano, citizens in Caracas now wait for hours at banks to obtain their daily allowance of cash, equivalent to just a few cents and worth less and less each day.
- Venezuelans are forced to contend with completely arbitrary daily withdrawal allowances. Pozzebano's report details his attempt to get cash in the Venezuelan capital, ultimately getting 10,000 bolivars — that day's allowance — after visiting four banks over four hours. That day, 10,000 bolivars equaled six U.S. cents.
- The country's government assistance program gives citizens bags of essential goods at subsidized prices. Those goods have been shrinking in both size and quality as foreign investment in Venezuela collapses, but even they cost 30,000 bolivars each.
- Bloomberg notes that, according to its Cafe con Leche Index, the price of a cup of coffee in Caracas has risen from 5,500 bolivars to 45,000 bolivars in just 12 weeks. That pace, should it continue unabated, indicates an eye-watering annualized inflation rate of 448,025%.
For the macroeconomic forces behind Venezuela's collapse, Harvard professor — and former Venezuelan minister of planning — Ricardo Haussman collected some mind-boggling stats last year for Project Syndicate:
- Venezuela's GDP contracted by 40% in per capita terms from 2013 to 2017 — and that's based off estimates as Maduro stopped reporting economic data in 2015. A recent filing with the SEC by the Venezuelan government indicated that its economy had contracted by 16.5% in 2016 alone.
- To make things worse, the decline in Venezuela's oil production and decreased global demand of Venezuela's chief export — which greatly subsidizes its socialist regime — resulted in a 51% drop in national income from 2013 to 2017.
- The minimum wage declined by 88% from 2012 to 2017 when compared against the black market exchange rate.
- Venezuelans making that minimum wage cannot afford to feed a family of five, even when their entire income is devoted to purchasing the cheapest available calories.
- Income poverty jumped to 82% in 2016 — a shocking increase from 48% in 2014.