Life in Venezuela is difficult

Venezuela's little crypto revolution

For Gabriel Jiménez, Venezuela has become too dangerous. He has lived in the USA for two years: it is from here that he continues to drive his personal crypto revolution. reserve is the name of the latest project he works for. The application makes it possible, among other things, to bypass the inflationary Venezuelan currency bolivar. The application has been available in Venezuela since March. "The politicians have no solution for our country," the 31-year-old told DW.

Project on behalf of the revolution - advertising for the Petro with the faces of Hugo Chávez and Nicolás Maduro

The story of Jiménez is one of hope and betrayal. When the socialist government commissioned him three and a half years ago to design a cryptocurrency for Venezuela, the then young entrepreneur saw a way to get the government back. At that time, Jimenéz - like thousands of his compatriots - took to the streets against the autocratic head of state Nicolás Maduro. The economy of the oil-rich country has been bobbing for years.

The world's first state cryptocurrency

For him, a digital currency like Bitcoin was the epitome of freedom: no central control, full transparency - actually the opposite of what the government was looking for. Above all, she wanted a way to circumvent the American sanctions that were tightened by US President Donald Trump.

But Jiménez was no match for the power of the state. The Petro - the world's first state cryptocurrency - was anything but a revolutionary project in the end. Contrary to what Jiménez suggested, the value of Petro was not free, but rather linked to a large oil basin in the Orinoco Delta. He also had to rewrite the founding document - the so-called white paper - on command.

The crypto expert Gabriel Jimenéz in his new home in the USA

TV pictures show Jimenez on the day the Petro was founded. In a suit, the lanky Venezuelan stands on a large stage next to leading politicians and shakes hands. "I was naive and it still weighs heavily that the petro has become a political weapon of the government," he says today. In the end, he fled to the United States - shortly before his arrest, as he reports.

Hyperinflation burns Venezuelans' deposits

In the coder scene, Jimenez is not without controversy - the alliance with Maduro in particular makes him unbelievable for many. He has one thing in common with many other tech experts. He wants to outsmart hyperinflation. And that is huge in Venezuela. The government in Caracas only issued a new note at the beginning of March: it says one million bolivars - the converted value is less than half a dollar.

For years, inflation has burned up all Venezuelans' reserves. What you earn today can be worthless tomorrow. In 2020, according to initial estimates, inflation was an unimaginable 6500 percent - in comparison: The EU is aiming for a price increase of two percent.

Most Venezuelans therefore exchange their reserves for dollars. According to the Venezuelan consultancy Ecoanalítitca, 66 percent of all transactions are already in the US currency. However, similar to other hyperinflationary countries such as Zimbabwe, cryptocurrencies are also enjoying great popularity. This is shown by an evaluation of the trading volume on the platform LocalBitcoins (see grafic). Accordingly, the volume of Venezuelan bolivars in bitcoins has risen sharply since the end of 2019.

Shopping with Bitcoin, Ether and Co

Also the New York blockchain analysis house Chain analysis assumes that Venezuela is one of the most active countries in the world when it comes to digital currencies. Because most cryptocurrencies are managed in a decentralized manner, a statistical survey is difficult. Nevertheless, after the USA and Russia, Venezuela is the country that trades most digital currencies in US dollars P2P - i.e. directly between buyer and seller.

In the big cities like Caracas, Maracaibo or Valencia, it is sometimes even possible to pay with a digital coin at a street stall, reports the crypto journalist José Maldonado. Digital payment methods are also accepted in more and more shops. "Furniture, clothes, groceries - it is actually possible to buy almost everything with crypto currencies."

Maldonado writes from Venezuela for Cointelegraph, an international news portal for blockchain news. "The cryptocurrencies have a high presence here with us - especially Bitcoin, Ether, Dash and Eos," he wrote in response to a DW request. The crypto trading platform Binance is now just as well known in Venezuela as the traditional bank Banco de Venezuela.

Crypto toys for the middle class, refugees, and government

But it is mainly the middle and upper classes who pay or save with crypto currencies. The internet connection is often very poor in some parts of the country and even in the big cities. "The use of digital currencies remains an illusion for the majority," said Maldonado.

Payment via crypto - at Christmas the Petros government gave it for free

For the many Venezuelans now living abroad, in particular, cryptocurrencies are a way of sending money cheaply and quickly to their relatives. Of the nearly 30 million Venezuelans, five million fled abroad before the socialist government.

The Petro continues to fight for its reputation

The first digital currency of a country - the Petro - co-created by Gabriel Jiménez, is meanwhile being used by the government as a state instrument. So she gives Petros away as part of social programs. In mid-2020, petrol station operators in the country stated that around 15 percent of payments were processed via the Petro. Apparently the government wants to further increase acceptance. At the end of the year, around eight million employees received half a petro as a Christmas bonus - the equivalent of 30 dollars. Whoever wanted the bonus had to register on the state platform. Tax payments can also be made via the Petro since the end of 2020.

To what extent officials of the regime use the Petro to transfer funds abroad is unclear. But the accusation is in the room. Similar to Bitcoin and other digital currencies, the real senders and recipients can be concealed well.

For the crypto expert Gabriel Jimenéz one thing is certain: The Petro was a mistake. "That drives me to work harder today". The only good thing about the project was that other cryptocurrencies had also gained acceptance. It is still a small part of the world that has access to digital currencies. Still, it seems that this growing small part is gradually regaining its financial freedom. The risk is clearly defined: Because the cryptocurrencies are highly volatile - but given the inflationary bolivar, it's worth it for many.

  • Venezuela: a bled country

    Empty refrigerators

    In 2018, Venezuela had the highest inflation in the country's history: 65,374 percent in 2018 (Statista). In the same year, the International Monetary Fund even calculated inflation at 1,370,000 percent. Due to the lack of foreign currency, hardly any goods can be imported. Shopping in supermarkets is unaffordable for most Venezuelans because of the high prices.

  • Venezuela: a bled country

    Feeding the poor

    Often only those who bring their own plate or bowl get something to eat at the soup kitchens - as here in the Venezuelan city of Valencia. Because even the aid organizations lack disposable tableware. The once rich Venezuela has been suffering from a severe supply crisis for years. There is a lack of everything: food, medicine and the simplest things like soap or diapers.

  • Venezuela: a bled country

    The children are starving

    In Caracas, children desperately stretch out their arms when Caritas or other aid organizations distribute food. Many have not eaten for days. 96 percent of households in Venezuela live in poverty, 64 percent in extreme poverty (according to a study by the Catholic University of Andrés Bello). Meat, fish, eggs, fruit and vegetables are only served in very few families.

  • Venezuela: a bled country

    Health system on the brink of collapse

    Anyone who has to go to the hospital, like here in the San Juan de Dios Hospital in Caracas, has to pay for medication and aids such as catheters and syringes themselves. More than a third of the 66,000 licensed doctors have already left the country. The number of other health professionals has also dwindled, bringing the health system in Venezuela to the brink of collapse.

  • Venezuela: a bled country

    Clay and wood as free building materials

    A child is playing in his bahareque house. These are houses that are made of wood and mud and their construction dates back to the pre-Columbian era. Due to the growing extreme poverty in rural areas, this type of construction is becoming more common again. There is no water or electricity connection in these accommodations.

  • Venezuela: a bled country

    No electricity in Venezuela

    Permanent blackouts regularly paralyze the country. The opposition cites delayed investments, corruption and inadequate maintenance of the electricity systems as the reason for the constant blackouts. The government therefore took sometimes drastic measures to save electricity. At times, civil servants reduced their working week to two working days in order to save energy. Without success.

  • Venezuela: a bled country

    living on the street

    If the power fails, the houses are unbearably hot without functioning air conditioning: people take their lives on the streets - like here in Maracaibo. For years there have been regional as well as nationwide power outages in Venezuela. President Nicolás Maduro claims that his political opponents are carrying out targeted acts of sabotage against the infrastructure.

  • Venezuela: a bled country

    Acute water shortage

    The water supply in the Santa Rosa district of Valencia has collapsed - again. People bathe and wash in a puddle on the side of the road. In some places in Venezuela there is only a few hours of running water three days a week. Many families then quickly fill all available bottles and jars so that they have some water when the line stays dry again.

  • Venezuela: a bled country

    electricity and water

    Only sewage and toxic chemicals flow in the Rio Guaire. In Venezuela, water and electricity are delicately interdependent: the lack of electricity and inadequate maintenance cracked the walls of the country's reservoirs and the water level sank. As a result, less electricity could be generated in the hydropower plants and blackouts occurred. A vicious circle.

  • Venezuela: a bled country

    Contaminated with oil

    Venezuelans swim in oil, but not in the good way: on Lake Maracaibo, fishermen throw their nets from old car hoses into the water, even though the water is contaminated with oil. The coasts are also affected: due to leaks in oil pipelines and a breakdown in a refinery near Puerto Cabello in the northwest of the country, around 20,000 barrels of crude oil are said to have spilled into the sea.

  • Venezuela: a bled country

    "The people need gasoline"

    In Guacara in the state of Carabobo, the cars have been standing in front of the gas station for over two weeks, waiting for gasoline. Venezuela has to import oil from Iran because its own ailing oil plants can hardly produce any oil. Ten years ago the production rate was a good 2.3 million barrels per day, but has now fallen to less than half.

  • Venezuela: a bled country

    Energy supply collapsed

    In Caracas, people wait on the street with their empty gas bottles and hope that they can finally be refilled. Since the energy sources electricity and gasoline fail repeatedly in Venezuela, people have switched to gas. This has also become scarce.

  • Venezuela: a bled country

    The halo has faded

    The likenesses of Hugo Chávez, Fidel Castro, Evo Morales and Rafael Correa look from a house wall in Caracas at an overflowing dumpster. Many Venezuelans have long venerated the socialist leaders of Venezuela, Cuba, Bolivia and Ecuador as saints. In Venezuela, 21st century socialism has failed to deliver on its promise of prosperity for all.

    Author: Mirjam Gehrke