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Crisis in Venezuela revives the use of gold as a means of payment

To understand the magnitude of Venezuela’s financial collapse, travel southeast of Venezuel, past the oil fields and the Orinoco River, and head deep into the savannah that covers one of the most remote corners of the country.

There, in the hair salons, restaurants and hotels that make up the main strip made up of one dusty stall after another, you will find that prices are displayed in grams of gold.

An overnight stay in a hotel? That would cost half a gram. Lunch for two at a Chinese restaurant? A quarter of a gram. A haircut? An eighth of a gram, please. Jorge Peña, 20, calculated that the eighth was equal to three small nuggets, or $ 5. After recently getting a cut in the city of Tumeremo, he handed them to his barber, who, satisfied with Peña’s calculation, quickly put them away. “You can pay for everything with gold”Says Peña.

In the high-tech global economy of the 21st century, where contact transactions are all the rage, this is the least technological thing out there.

Most of the world left gold as a medium of exchange more than a century ago. Its resurgence in Venezuela today is the most extreme manifestation of the repudiation of the local currency, the bolivar, that has swept the country. It has been rendered almost useless by hyperinflation. (The Nicolás Maduro regime has just cut another six zeros).

Instead, the dollar has become the de facto choice in Caracas and other major cities. Along the western border with Colombia, the peso is the dominant currency. It is used in more than 90% of transactions in the region’s largest city, San Cristóbal, according to research firm Ecoanalítica. On the southern border with Brazil, the real is usually the currency of choice. And the euro and cryptocurrencies also have their niches in some areas of the country.

Trust was lost

Economist Luis Vicente León, president of the Caracas-based research firm Datanálisis, says that people simply stopped trusting the bolivar and that it no longer fulfilled its function as a repository of wealth or a means of accounting or exchange.

Today, only the poorest Venezuelans, those who do not have easy access to dollars or other currencies, still use bolivars. According to León, people prefer any currency to the bolivar.

In parts of southeastern Venezuela, that currency is gold.

The land there, a stunning world of mountains and giant waterfalls that tumble over lush valleys, is full of precious metals. The temptation to obtain riches overnight has drawn generations of aspiring miners and engraved the names of the region’s cities, El Callao and Guasipati, in Venezuelan folklore.

Currently, the area is a violent and lawless place, invaded by gangs and guerrillas. Shootouts with Maduro’s soldiers, who control many of the largest mines, are common. And yet Venezuelans still come from everywhere, fueled by stable job shortages amid an economic depression that has spanned more than a decade.

Small illegal mine operators generally pay day laborers in nuggets. That constant supply, coupled with the fact that internet reception is so bad that digital transactions are nearly impossible, makes gold the least bad option for locals.

‘Fragment nuggets’

They use hand tools to fragment the nuggets and then carry them in their pockets, often wrapped in bolivar bills, one of the few remaining uses for the currency. Stores have small scales, but some traders and consumers are already so comfortable handling the metal that they calculate the amount of gold with the naked eye.

To the inexperienced outsider, this sounds wild.

How is it possible to determine authenticity and weight with a simple glance from someone who has not received training in mineralogy? Gold experts, however, back up what the locals say: skill develops over time.

Juan Carlos Artigas, head of research at the World Gold Council in New York explains that gold is an element that, unlike diamonds that are difficult to evaluate, has intrinsic characteristics and there are specific things that can be looked for, especially in the smallest pieces.

The use of gold is slowly expanding to nearby cities, including Ciudad Bolívar, the state capital located on the shore of the Orinoco. Miners regularly travel there to sell their bullion when they want to transform it into cash, and stores in shopping malls exchange them for dollars.

But in mining towns like Tumeremo, there is little need to carry anything other than gold.

The owner of a small hotel in the city (he only gives his first name, Omar, for security reasons) says that he pays his staff with gold, using the nuggets that clients give him. He charges half a gram a night for a room.

About two-thirds of customers pay with gold, Omar estimates. It also accepts dollars and other foreign currencies from those who do not have gold. And the bolivars? By law, he can’t say no, so he takes them reluctantly, he says, and then spends them quickly.

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