Venezuela has been facing many difficulties for years. First of all, the country is in the grip of an unprecedented economic crisis. This crisis is reflected in hyperinflation, which is increasingly devaluing the local currency, the bolivar. In addition, as a result of geopolitical tensions, Venezuela is undergoing US economic sanctions. In the midst of this inextricable situation, Bitcoin plays an important role in keeping the country functioning. Let’s see how.
US sanctions complicate imports and exports to Venezuela
US sanctions have put President Maduro under pressure. Indeed, they have made the country’s economic situation even more complicated. While the country is more dependent on its external market than ever before, many western countries are reluctant to export its products to Venezuela under US pressure. These sanctions have therefore forced the Venezuelan government to find solutions for imports and exports.
The use of private companies to circumvent US sanctions
To avoid the economic suffocation of the country, President Maduro wants to convert Venezuela into an “exporting nation”. To do this, the Maduro government has decided to rely on its private companies, not subject to US sanctions, for its exports. This makes it possible to circumvent US sanctions. The government’s plan is to use these private companies to strengthen economic cooperation with its main allies. For example, Turkey and Iran are the countries that supply Venezuela with food and fuel.
In the first half of 2020, 35 private companies imported food from Turkey, compared to 7 in 2019. In all, more than 140,000 tonnes of products were brought into the country in the first half of 2020. These products consisted mainly of pasta, oil and meat.
Bitcoin, the solution for imports into Venezuela
In addition to going through its private companies, the Venezuelan government has decided to finance its imports with Bitcoin. Thus, imports from Turkey and Iran were mainly paid for in Bitcoin. There is talk that Iran will soon take the same step to finance its imports.
In 2018, the Venezuelan government had created its own cryptocurrency, Petro. This crypto was backed by oil and had the ambition to be used on a large scale in the country to make up for the weakness of the bolivar. However, this state-owned crypto never won over the crowds. The government was therefore forced to turn to more traditional cryptos, led by Bitcoin.
“We are going to use all the world’s cryptocurrencies, whether private, public or national, for our internal and external trade.
Maduro, President of Venezuela
At the citizen level, the Venezuelan government has taken a further step to encourage the use of Bitcoin, which is already widely used in the country. For example, in November, the government launched a new exchange that will allow Venezuelans to change their bolivar into Bitcoin.