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Gold is being used as currency in Venezuela

Gold is being used as currency in Venezuela

“A trending video on social media illustrated that in some states of Venezuela, people are using gold for their everyday transactions. In fact, it shows that they are using the domestic currency to wrap the grams of Gold. It is that worthless.”

Much has been written about Venezuela’s hyperinflation. The country has had the highest inflation rate of any country since 2013. It entered hyperinflation in 2017. And by 2018, it already had an inflation rate of over a million percent, leaving most Venezuelans without their salaries and life savings. Overall, Venezuela’s hyperinflation is not only among the highest in history but also the longest. And paradoxically, it did not involve any war nor natural catastrophe, but a socialist government. 

As a result of this monetary madness, Venezuelans started working around the system. They started to find ways to circumvent the domestic currency. Near the border, people started using the Colombian currency, the peso, for their everyday transactions. And throughout the country, Venezuelans started using American dollars to buy, sell, pay wages, etc. 

According to the consulting firm, Ecoanalitica, over 70 percent of Venezuela’s transactions are carried in dollars. This goes from big transactions like buying a car to small transactions like buying bread at the supermarket. Overall, people understood that a stable currency is required to do economic activities. And sadly, the Venezuelan currency, the bolivar, was no longer an option. 

But interestingly, there is another means of exchange being used in Venezuela: gold. And while it is not as used as the American dollar or the Colombian peso, the fact that gold is being used for transactions is as interesting as it gets. 

Gold is being used in the southern part of Venezuela because in such states, there is a growing and very profitable mining industry. So, instead of using fiat currency, workers in the mines are being paid directly with gold, which they then use for their everyday transactions. 

This dynamic became viral last week as a result of a video published by a Venezuelan worker. In the said video, people could see the use of gold to buy in a grocery store.

Another thing that people noticed is that the bolivar is indeed used, but not as a currency. It is instead used to package the grams of gold used to carry the transaction. Namely, buyers receive the gold wrapped in a bolivar banknote.

Overall, this dynamic illustrates the state of the Venezuelan economy, an economy barely functioning, without modern institutions, and with people doing everything they can to survive. 

Jorge Jraissati is a Venezuelan economist and freedom advocate. He is the Director of Alumni Programs of Students For Liberty, an NGO advancing the ideas of a free society in over 100 countries. Beyond SFL, Jorge is a research consultant for IESE Business School, an economist from the Wilkes Honors College and the President of Venezuelan Alliance, a policy group specialized in the Venezuelan humanitarian crisis. Jorge is a weekly columnist here at Freedom Today Network.