By Patrick Brogan
Venezuelans could be turning to Bitcoin as a solution to crippling inflation and economic problems. It has been reported there is a growth in the mining of the cryptocurrency. Some even suggested the beleaguered country may Bitcoinise entirely.
Years of mismanagement of the economy has led to a dire situation. This has taken place under the watch of the United Socialist Party (PSUV). Protests have been frequent under the Presidency of Nicolas Maduro who took over in 2013. Hugo Chávez was the President before him and he took office in 1999.
Under the socialist government, many programmes were implemented, including the building of one million homes for those in need. However, these social programmes were over-reliant on the money brought in through oil exports, which accounted for 95% of the total. When the price of oil dropped the economy was hit hard.
The reliance on oil also led to other problems. Companies were forced to sell at a fixed rate. Eventually, this became unprofitable and they folded. Venezuela then turned to foreign alternatives with its oil money. When the price of oil dramatically dropped it caused huge problems because the country could no longer afford food and medicine leading to a scarcity.
In the 70s, Venezuela was the richest Latin American country and was in the top 20 of countries in terms of GDP. Venezuelans enjoyed high living standards until the price of oil crashed in the 80s. Sounds all too familiar, doesn’t it?
Then Hugo Chávez took over. While there was wealth in the country, it was not evenly distributed. Half the country was below the poverty line. To some degree, his social programmes alleviated the poverty, but when they were tied up so closely with oil, there were always prone to volatility.
Bitcoin has many positives. There is no third party seizure, no taxes and according to its Wiki page “bitcoin inflation rate steadily trends downwards.” It is immune to what happens in any one country and is a better alternative for trading in Venezuela.
Even though Bitcoin is legal in the country, reports are surfacing of a Government crackdown on the cryptocurrency. Many believe this is because the Maduro administration fear it undermines the power the Bolívar, the national currency. Bitcoin uses up a lot of electricity, which is heavily subsidised by the State. As a result, it is closely monitored and it is the use of electricity and internet laws that Bitcoiners have been arrested for. There are clever ways around this as this video shows.
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