The value of Venezuela’s bolivar currency collapsed this month, as air carriers and U.S. automakers announce they will only do business in U.S. dollars.
According to DolarToday, a website which tracks the black market exchange rate of Venezuela’s currency, one U.S. dollar is now worth 396 bolivares. As Bloomberg Business reported Monday, that means that the 100-bolivar note, the largest paper denomination of the currency, is worth about one U.S. quarter.
The value of the bolivar collapsed drastically earlier this month, dropping from 279 per dollar in early May to the current rate of nearly 400 per dollar over the course of two weeks. In a story published Tuesday, Bloomberg Business notes that the black market exchange rate is higher than the implicit exchange rate calculated by looking at the amount of gold reserves Venezuela has to back its currency. Bloomberg writes that the fact that the currency has continued its rapid collapse suggests Venezuelans, “have lost all faith in the bolivar.”
One possible explanation for the loss of faith in the bolivar may be the shift by some major companies to a dollars-only business model. On May 8th, Ford announced it would only accept dollars for cars sold in Venezuela. That announcement came about 10 days after GM announced it would probably stop all production in Venezuela by July and began laying off workers.
Meanwhile, Venezuela’s difficulties with international air carriers have continued. Several carriers cut flights to the country last year over a debt of nearly $4 billion, which the Venezuelan government balked at paying in dollars at the agreed exchange rate. Now, American Airlines has stopped accepting the bolivar for tickets, forcing those who wish to fly to pay online in dollars.
Venezuela’s socialist government has continually blamed its problems on an economic war being waged against it. President Maduro has specifically blamed DolarToday for providing daily black market exchange rates. The Venezuelan government has attempted to block access to the information but with limited success.