Venezuela’s crumbling economy has seen millions cross the border with neighbouring Colombia to buy food and essentials.
With shop shelves empty and bank withdrawals limited to 10,000 bolivars a day – just US$5.25 – millions have queued at frontier posts for hours.
Almost all the Venezuelans shopping in Colombia crossed at three border points in Norte de Santander province.
The Colombian government reports 5.6 million Venezuelans have entered the country since August and almost all have gone back.
Around 65,000 have stayed in Colombia in a bid to secure an immigration card that allows them to remain in the country for longer.
750% inflation
The Venezuelans are buying food, medicine and other supplies that have run out or are unaffordable due to rampant inflation and sky-high black market prices.
The Caracas government is trying to crack down on the black market by controlling money supply.
The Sudeban central bank has ordered all banks to limit the amount paid out daily in cash or from cash machines.
Customers can make four withdrawals but the amount cannot total more than $5.25.
Although the government has stopped reporting inflation figures, economists reckon the cost of living has risen by 750% in the past year.
This led to a run on banks as consumers stockpiled notes so they could buy goods, pushing prices up even higher.
Many are asking how an oil rich economy like Venezuela falls into financial ruin.
Plunging oil prices
Two years ago, US$1 bought 100 bolivars. Today, the exchange rate is nearer 1,275 bolivars.
Plunging oil prices are mostly to blame for crippling the economy. In the two years of raging inflation, the price a barrel has dropped from US$120 to US$45. Oil accounts for almost all Venezuela’s exports and lack of investment has seen production fall to a 13-year low.
A lot of the issues for the economy are cash flow mismanagement by the government.
This has led to a lack of foreign currency reserves, meaning businesses in Venezuela do not have the cash to buy imports. This has led to scarce food and essentials.
Crunch time is approaching – the $17 billion the country owes other governments and investors is considerably more than the $12 billion held in currency and gold reserves.
