PUBLISHED: 1:14 AM 5 Jan 2018

Socialism Spiral, Country Forced Into Strange Barter As Economic Collapse Threatens Lives

Nicolas Maduro's centrally-planned Socialist government is unable to convince any country or business to accept the Bolivar in exchange for goods. This being the case, they are now reduced to begging businesses to take gold, diamonds, and coltan in exchange for medical supplies they badly need.

Nicolas Maduro’s centrally-planned Socialist government is unable to convince any country or business to accept the Bolivar in exchange for goods. This being the case, they are now reduced to begging businesses to take gold, diamonds, and coltan in exchange for medical supplies they badly need.

Venezuela has been collapsing in slow motion for the last two years, in a process that has been interesting to watch on television for most of America.  However, in Venezuela, the process is much more dire, much less entertaining and much more dangerous.

Due to the centrally-planned economy, Venezuela’s woes continue to worsen as the government continues to lose control of the nation.  Now, it seems that the nation of Venezuela is so desperate that they attempted to pay for more medical supplies from pharmaceutical companies in precious stones and gold.

Venezuela’s supply of medical supplies, even the most basic medical supplies like needles, gauze, and basic medicines like penicillin, is almost nonexistent.  Hospitals have, for months, been trying to sneak in medications and basic goods from nations nearby, in order to still be able to offer services to the beleaguered populace.

Venezuelan hospitals are out of almost everything that hospitals need, including basics like bandages, gauze, and basic medications. They’re also out of food and anything even resembling food, which is important when trying to keep a starving populace alive.

However, even that is becoming more and more difficult.  The Venezuelan government, which sets the official exchange rate of the Bolivar, continues to pretend that the Bolivar is the equivalent of about 1/8th of a dollar, while the black market rate is closer to 8,000 Bolivar for the dollar. Because of this, the Bolivar is essentially considered to be worthless outside of Venezuela, and thus most businesses will not exchange medical supplies for them.

In the last year, the Bolivar endured inflation of more than 4,300 percent.  Leading economists fear that in 2018, the inflation rate will be over 30,000 percent, suggesting that the Bolivar will be essentially worthless.  Businesses and other nations are aware that the Bolivar has no value and that the government is close to collapse, so the Venezuelan government cannot use them to purchase almost anything from outside of the country.

The Venezuelan government, however, has a solution.  The government of Venezuela is offering to exchange gold, diamonds, and coltan (a metal used in electronic devices like cell phones, computers, and more) with other nations or medical suppliers in order to keep their hospitals stocked with supplies.

This is coltan. It is in our phones, our computers, our cars, and almost anything with a circuit board in it. It also is not something that pharmaceutical companies usually accept as a form of payment, because it is hard to sell it to an electronics company at a decent price as they already have well-established supply pipelines.

Omar Zambrano, a Venezuelan economist based in Caracas, pointed out that this is not a good sign.  According to Zambrano, “money was created so that we could avoid having to barter for basics.” Zambrano continues on to say that “we’ve fallen so far that we’re now going back in time.”

Fellow Caracas-based economist Orlando Ochoa pointed out that using commodities, like gold, diamonds, coltan, or even oil to make payments to pharmaceutical companies is extremely rare, almost unheard of. According to Ochoa, “it feels like a bluff.”  Ochoa says that “it’s as if they want to show off their assets to give the illusion that there’s still an intention of paying even though they can’t pay.”

If Venezuela can convince businesses, such as pharmaceutical suppliers, to take commodities for payment, they may just be able to stave off collapse in the short term.  However, the truth is that Venezuela cannot maintain that kind of exchange in the long term.

When Venezuela seized the means of oil production, mostly from British owners, they made a massive profit overnight. They also forgot to maintain their equipment or their tanker ships, meaning that at this point, they are barely capable of producing oil, let alone selling it at a profit.

Firstly, Venezuela has limited commodities for trade on hand.  However, while the country may sit on top of rich deposits of both coltan and oil, the Venezuelan government is incapable of accessing them in a profitable way.  In other words, this is a method to stave off catastrophe in the short-term, not a long-term solution.

Venezuela’s economy was heavily based off of the oil deposits that it controls, most of which it seized from private businesses during the Chavez regime.  In 2012, 96 percent of the country’s exports and more than half of its fiscal revenue was entirely based off of oil.  As the price of oil decreased around the world, Venezuela was less able to support itself.

Eventually, the loss in oil revenue, combined with mismanagement of the equipment needed to drill for, process, and transfer oil, lead to this deep depression currently ongoing in Venezuela.  With the lack of income for the country, the government, which controls imports, is unable to bring in food and medicine.

Venezuela is falling apart, and has been for at least two years now.  The only question now is how the country will finally collapse; due to violence in the streets between citizens and the government, the hyperinflation of the Bolivar to near-worthlessness, intervention by outside forces, or a violent government overthrow.