Friday, October 15, 2021

The payment application of “Zelle” … a save for Venezuelans from the crises of inflation and the dollar

When Federico Suarez traveled on an overnight trip to Valencia last month to visit his friend, the 24-year-old, Caracas-based lawyer was in the mood for luxury, so the two enjoyed a weekend breakfast of traditional pancakes, bought cheese and imported pasta, and then went to eat Sushi.

They bought everything using the “Zelle” app, owned by a group of the seven largest banks in the United States. “I can pay for things everywhere,” Suarez says. “The only problem is that I buy too much.

Inflation is out of control
PayPal and Venom may have become widespread in the United States, but in Venezuela, Zelle or Zell-ey is on everyone’s tongue. All over Caracas, home-designed banners reading “Aceptamos Zelle” hang from store windows and shelves of products. Copies of the purple company logo are affixed to the cashiers in stores, some of which have designated rows for customers who want to pay with the app.

Improvised banners indicate that Venezuela’s use of “Zelle” is a relief from a currency whose value continues to decline rapidly due to uncontrolled inflation rates. While the use of the application is not prohibited; It could certainly be described as an unauthorized use.

The application is suitable for impulse purchasing operations, such as a piece of candy, or a new shoe, in addition to more important needs. “Without Zelle, we would have had fewer patients,” says Dr. Antonio Farfan, a surgeon at a private clinic in Caracas. “I know the app exists for occasional payments, but here it’s used for everything.”

bad management
The high turnout of Venezuelans for digital money is not a matter of choice, but rather a necessity, as the value of their own currency (the bolivar) is equal to the value of the Monopoly notes, as a direct result of the mismanagement of the socialist government of Nicolás Maduro, which, since it took power in 2013, has ruled for seven consecutive years that have prevailed Economic downturn. According to the International Monetary Fund, the gross domestic product is now a fifth of what it was when the state of Maduro began, while inflation exceeds 4000% according to the “Bloomberg” index, which is linked to the price of a cup of coffee with milk, as the largest Venezuelan banknote is the 50 000 bolivars, equal to less than ten cents of the American dollar.

This disastrous 15-year experiment with capital controls created a thriving black market for the dollar. Initially, the Maduro government turned a blind eye to it when street corner stores, restaurants and beauty salons began accepting U.S. currency. Last year, the president publicly endorsed the use of the US currency, partly hoping that it would help tame inflation and stabilize the ailing economy, saying during a live broadcast on TV in November 2019: “I don’t see that as a bad thing, this process called (dollarization). And adding: “I thank the Lord for her presence.” Ecoanalítica estimates that more than 60% of all conversions in Venezuela currently occur in dollars.

Venezuela is not alone
Venezuela is not alone in this, as many countries have officially adopted the US dollar as a currency, including Ecuador, Turks and Caicos Islands. On the other hand, Venezuela is an example of what economists call automatic “dollarization”.

“Governments often don’t say anything to citizens about it,” says Steve Hankey, a professor of applied economics at Johns Hopkins University and an expert on inflation. “Even though the use of the dollar is often illegal, this happens a lot, especially In the event that there are sanctions imposed on the state or it has occupation armies. “

The Trump administration, the former US president, did not hide its desire to change the regime in Venezuela, but refrained from sending troops to the South American country, and instead imposed sanctions on Maduro, in addition to about 140 officials, and the current and former governmental body.

Today, the US currency is also in demand on the streets of Havana and Tehran, but sanctions in these places effectively limit the presence of dollars that can enter the country by tourists or visiting expatriates.

According to Darshek Dholakia, who is a partner at Dechert LLP in Washington and specializes in advising companies on sanction compliance, unlike these pariah countries; “Digital dollarization” through services like “Zelle” has enabled a presence in Venezuela because its citizens enjoy constant access to the US financial system. “Venezuela is in a very unique position, as it is currently the only country in which the government is subject to comprehensive sanctions, without subjecting private individuals to this,” he says.

According to the organization that organizes the referendums in Caracas “Datanálisis”, about 8% of adult Venezuelans have foreign bank accounts or access to electronic wallets, but this number has ballooned to include about 5 million expatriates who have fled the crisis of their country, including them Hundreds of thousands have settled in the United States.

Expatriates are the main contact for Venezuelan “Zelle” users, including Gerardo Zambrano, who lives in Petari, a slum in Caracas. The 31-year-old graphic designer receives his salary at a friend’s account in Los Angeles, then sends him a text message to send him a transfer every time he wants to pay someone, but it’s not always simple, because of the time difference. To four hours between the two cities. And in August, when his father woke up, and found himself covered with a rash,
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