Inflation, even in dollars, dims Venezuelans' holiday season

Tradition dictates that Venezuelans, children and adults alike, wear brand new clothes on Christmas and New Year’s. Shirts, pants, dresses, stilettos and sneakers — all with that new smell and perfect, first-time fit. No wrinkles, stains or scratches allowed.

But the dollar bills circulating all across the country might as well show the Grinch instead of Washington this year. The government’s loosening of controls on dollars may have made them easier to get, but it has also made them less valuable in Venezuelan shops, with dollar prices overall about 40% above those last year.

And that has threatened the tradition known as “estrenos,” or premieres — a practice already badly eroded by Venezuela's sharp, yearslong economic decline.

People have been hunting for Christmas bargains, but often walk away from stores and market stalls empty-handed.

Marelvy Mallarino lives in Maracaibo once the heart of the country’s oil boom and now a victim of its bust. She had not stepped into a mall for years, but decided to visit one in Caracas the capital, while visiting her sister.

“Will it be enough? Won’t it be enough? We are counting the coins,” Mallarino said while waiting in an enormous line outside a store offering discounts on women’s shirts, shoes and denim on Black Friday. Venezuelans call it that in English, too.

One store offered fast-fashion heels, boots, wedges and sneakers discounted to $20 instead of $60. Headbands and other accessories were on sale for $1. At another store, cropped jeans for women were priced at $30, down from $100.

Those may sound like bargains abroad, but the dollar prices were much higher than even a year ago, and largely out of reach for people like Mallarino, who lost her business when the country’s oil industry collapsed and now lives off of remittances sent by her children in Peru.

After about an hour in line, she entered a store and grabbed a white short-sleeve top from a rack, flipping the hanger from one side to the other to inspect the shirt. She hung it back, looked around the store for less than 10 minutes and walked out, looking down and shaking her head.

When Venezuelan companies and the public sector were thriving more than a decade ago, employees would get hefty Christmas bonuses — often three times their monthly salary, all at once. That allowed families to buy new outfits for all, an imported Christmas tree and enough food for the traditional holiday spread.

The smell of fresh paint signaled the arrival of Christmas because so many put a new coat on their walls.

But the economy has shrunk by 75% since 2014 and the minimum wage for public employees and retirement payments has fallen to the equivalent of $2 a month. Monthly salaries in the private sector average $75. That has pushed many to find side jobs, rely on remittances or leave the country.

In the past, for those who could get them, stable greenbacks were a safety net against the increasingly worthless bolivar as prices in the local currency rose by tens or hundreds of thousands of percentage points a year.

People would wait for a day when the bolivar had fallen especially fast — quicker than stores could raise their prices — and change dollars into bolivars on the black market, where the rate was far more favorable than the official one. They'd quickly spend those stacks of local currency.

That’s all changed.

The country’s socialist government has eased price controls, and two years ago, it abandoned its complicated efforts to restrict transactions in dollars. There's now little difference between the official and black market exchange rates.

And with dollars no longer frowned upon, some merchants don’t even bother giving prices in rapidly deteriorating bolivars anymore.

“Obviously, dollarization in essence is the destruction of confidence in your currency, and Venezuelans began to take refuge and work more in dollars," said Asdrubal Oliveros, director of the Caracas-based economic consulting firm Ecoanalitica.

Meanwhile, prices have been rising even faster than the bolivar has been falling against the dollar — so that the local currency, despite its rapid plunge, is paradoxically overvalued. Prices rise faster than the pace at which people can change dollars into bolivars, he said.

While prices in bolivars are still inflating at a rate of more than 1,300% a year, the cost of living is now rising in dollars as well — by about 40% over the past year, Oliveros said. Data from Ecoanalitica show it now costs $330 to buy what you could get for $100 three years ago, when the new policies took effect.

The overall impact is that Venezuela's 1.5 million public employees and 3 million pensioners can't afford any part of the traditional “estreno” — "a pair of shoes for example,” said José Guerra, an economics professor at the Central University of Venezuela. “A minimum wage plus bonuses does not reach $12, $14.”

Guerra said the year-over-year inflation rate in bolivares for clothing reached 2,265.6% in October — far above the overall rate.

At a popular market near a bus station, people walk up and down aisles packed with clothes, shoes, linens and other home goods. “One dollar, one dollar!” market vendors yell over stacks of sleeveless stretchy tops.

Zenaida Quintero, a public employee for 15 years, went to the market searching for bargains, thinking merchants might have lowered prices, in part because of the pandemic.

Her Christmas bonus — paid in bolivars — this year was about $13, which she spent on her prepaid cellphone service and a few vegetables. But her husband found a construction job that pays in dollars.

She brought greenbacks to the market but felt they were “practically worthless.” After buying a sweater for her granddaughter, she couldn't find something she could afford for herself.

At least this holiday season, unlike last year, she was able to paint her home, thanks to her husband’s salary.

“I had $20 today, and I spent it, and I have about $5 left. And what did I buy?” she said, pointing to the sweater in a plastic bag in her hand. “This is horrible, really. ... You see the crowd here, and you think: ‘Oh, here, everybody has money because they are buying.’ No, that’s a lie.”