This is a Deepl translation of an article published in the Swiss newspaper Tages-Anzeiger on May 3, 2018. The original German article can be found here .

Where Swiss chocolate costs several months’ wages

In Venezuela, prices have risen 300-fold. There is too much money - but too little cash.

‘José! The flower shop won’t give us a price this early in advance.’ Maria looks anxiously up at her son. José is due to marry his girlfriend Cristina in a fortnight’ time. ‘This early in advance’, it is simply impossible to predict any price in Venezuela. The country has been in the grip of hyperinflation since November 2017, with prices currently doubling roughly every month.

For the wedding, the family and friends have been searching the supermarkets for weeks for the ingredients for a sweet pastry. At some point, Maria has had enough and switches to a street market. Some of the scarce goods are still available there, albeit for several times their ‘normal price’. And so she buys two bags of coconut milk powder and four bags of cocoa for 3.3 million bolívares. She spends a further 4.2 million on salt-free butter, cocoa butter and cream cheese.

To put this into perspective: José has been teaching two courses at one of the country’s largest universities since October. A full-time salary there would amount to around 10 million bolívares. The few ingredients would have already eaten up three quarters of his salary. However, the 31-year-old has not yet received a salary. He only goes to work out of moral conviction. ‘I have enjoyed a public education, now I have to give something back,’ he explains.

A question of life and death

José’s father has been paralysed on one side since suffering a stroke and can only pronounce individual sounds. Since then, his wife, son and an employee have been caring for him at home. Despite everything, the family is lucky in misfortune: the medication is sent to them by friends and they keep their savings in US dollars.

José taught himself investment strategies and earns around 350 dollars a month on foreign stock exchanges. He exchanges the money weekly via a dealer on the black market in Bolívares. This is how the family survives.

Ultimately, the decisive factor for the population is the purchasing power of their salary within Venezuela. On 20 June, President Nicolás Maduro increased the statutory minimum wage for the fourth time this year - to 3 million bolívares per month. In addition, Venezuelans are entitled to 2.2 million bolívares in food vouchers.

Every month, the NGO Cenda measures how much a family of five would need to survive. In June, it was just under 380 million bolívares - and a quarter of the products were almost impossible to find, regardless of the price. In the last 12 months, prices have increased at least three hundredfold.

Holding foreign currency has become a matter of life and death in the hyperinflation: Those who have access to US dollars survive quite well. But those who only earn bolívares languish or die. According to a study by Venezuela’s three leading universities, 87 per cent of the population was already living in income poverty before the hyperinflation. 64 per cent of people stated that they had already involuntarily lost an average of eleven kilograms in weight. In December 2017, the New York Times had access to unofficial statistics in nine hospitals in the country and reported that 400 of almost 2,800 cases of malnourished children had died in one year.

Central bank and statistics institute under Maduro’s thumb

The situation has worsened in the meantime, but the exact extent of the misery is difficult to assess. Statistics are published by the parliamentary finance commission, private NGOs, university researchers and the International Monetary Fund. The central bank and the national statistics institute - both under the thumb of Nicolás Maduro’s government - have not published the politically sensitive figures for several years.

José bought the things for his wedding as early as possible, especially as prices rise a few percentage points every few days. He bought the alcohol six months before the wedding. For the most part, the shops no longer bother to advertise the prices. Instead, employees keep lists of current prices on notepads.

15 million for chocolate

Some supermarkets have barcode scanners that can be used to call up the current prices. In mid-May, for example, half a kilo of Swiss chocolate cost 15.5 million bolívares in the duty-free shop at Caracas airport. At that time, this corresponded to 6 or 15 minimum wages, depending on whether food vouchers were included.

However, a tourist would hardly have the means to buy anything at all. This is because cash is so difficult to obtain that it has itself degenerated into a commodity. At markets, bundles of banknotes are sold at twice their price. And vice versa: if you pay for something in cash, it often only costs half as much.

Payment is therefore generally made electronically. But there are different exchange rates, and if you use a foreign credit card, you get the bolívares at roughly the official exchange rate. The Swiss chocolate would have cost 217 francs with a Visa card.

Central bank creates money to finance corruption

You can only get the right price if, like José, you buy bolívares electronically on the black market - but this only works with a Venezuelan bank account. So the chocolate would have cost the equivalent of around 8 francs. Citizens and the private sector buy foreign currency almost exclusively on the black market. According to current estimates, 90 per cent of the private sector’s imports are financed in this way.

The direct cause of inflation is that the central bank is creating money under the government’s thumb in order to finance public enterprises, the spending deficit and corruption. As a result, the money supply has increased 93-fold in the last twelve months. The national currency is now worth less than the paper on which the banknotes are printed.

Inflation of one million per cent possible

The International Monetary Fund estimates that annual inflation in Venezuela will probably reach one million per cent in 2018. However, such estimates are extremely uncertain - US inflation expert Steve Hanke even called the forecast ‘dizzying’.

In addition, Venezuela exports almost exclusively oil and only receives external foreign currency in this way. Like many sectors of the economy, the state oil company PDVSA has been run down to such an extent that production has halved since the Chavistas took over. US dollars are therefore even scarcer and imports even more expensive, which is further accentuated depending on the oil price. Generally speaking, the more import-dependent a product is, the greater the inflation and scarcity.

Loyalty is everything

Behind these direct reasons for Venezuela’s collapse ultimately lies the government’s thirst for power. Like Hugo Chávez before him, Maduro elevates loyal servants to positions of power, mostly members of the military. For 19 years now, senior officials have been selected according to the motto ‘loyalty before professionalism’, which has led to an almost unimaginable accumulation of corruption and incompetence in the executive branch.

This is also evident in the planned currency reform. President Maduro declared at the end of March that there was no cash because the Colombian government and the opposition were stealing it. And that is why a new currency is needed. ‘We are putting new banknotes into circulation and cancelling three zeros,’ the dictator announced on the emergency channel on all TV and radio stations. His predecessor Hugo Chávez had already done the same in 2007 and renamed the currency Bolívar Fuerte (‘strong’ Bolívar). Maduro now wants to change it to the Bolívar Soberano (‘sovereign’ bolívar).

Less than a week before the announced changeover at the end of May, he then postponed the whole thing to 4 June, later to 4 August. And a week ago, he changed the date again to 20 August - with five zeros now being removed from the national currency. However, shops were already ordered by law at the beginning of May to display prices in the new bolívar at the same time. And these prices have so far increased in line with the old bolívar. The new currency is therefore already experiencing hyperinflation before the new cash is even in circulation.

Shortly before the wedding, María and José’s family managed to gather the ingredients for the cake. José and Cristina got married in a beautiful chapel on the outskirts of Caracas. After the wedding, the couple moved into a flat on the same floor where José had previously lived with his parents. The flat belonged to acquaintances who, like so many others, had left Venezuela. It was not the only flat on the floor that was empty.