As you may know, Venezuela is well known for its vibrant culture: a mix of African, European, and Indian traditions that are often called criollo (Creole).
But the past few decades have been turbulent. The PSUV party managed to take control of many of Venezuelas key social systems (including the Supreme Court) and the economy collapsed.
As prices for basic goods rose and the value of the Venezuelan currency fell, the population suffered greatly. In fact, the economic crisis has meant that more than 5m people have moved away [BBC] and it is one of the largest forced displacements in the western hemisphere.
However, with a very recent shift that allows private businesses to begin trading again [NY Times], there is a spark of hope. And, despite its recent history, the country is perhaps most rightly celebrated for its warmth, openness, and desire for equality, as well as the strength of its community.
And as youll know, those community bonds dont simply disappear when you move away.
In fact, people often find they make more effort to stay connected. For those who move away for work, one way to support family and friends as well as a countrys economy is by sending money home.
So, in this blog, we are going to discuss:
- What currency is used in Venezuela?
- The history of the Venezuela Bolvar
- The Venezuelan economy
- The exchange rate of the Bolvar
- How you can send money to Venezuela
What currency is used in Venezuela?
The official currency of Venezuela is the Bolvar Soberano (sovereign Bolvar) but, as you will see, the story of the Bolvar is a complicated one.
The history of the Venezuela Bolvar
Interestingly, the first known legal tender in Venezuela was pearls. Each pearl was valued according to its weight and they were the official method of payment between 1589 and 1620.
In 1844, the first coins the venezolano were introduced. They were minted in England and stamped with Republic of Venezuela. Made from copper, there were cents, half-cents and quarters. [Global Exchange]
The Bolvar (originally VEB) was first used in 1879, and was equal to 4.5g fine silver. The gold Bolvar was introduced in 1887, and in 1910 Venezuela used the gold standard as its monetary system, in which the value of its currency was directly linked to the value of gold. [Investopedia]
Like most other countries, Venezuela stopped using the gold standard in 1930, when the Great Depression hit. So, in 1934 the exchange rate was fixed to the USD instead, at a rate of 3.914 Bolvares to 1 USD. It was revalued to 3.18 Bolvares to 1 USD in 1937.
Did you know, the Bolvar Soberano is now minted in the Casa de la Moneda in Maracay in Venezuela and has its own logo?
The Venezuelan economy
The economy of Venezuela relies heavily on petroleum, which makes up 80% of the countrys total exports.
Relying on one product has been both a blessing and a curse: when things are good, theyre really good. But when global oil prices fall the impact on the economy is big.
Between the 1950s and the early 1980s, good oil prices meant that the Venezuelan economy grew steadily. However, in the 80s oil prices collapsed and the Venezuelan economy was impacted badly. This pattern has repeated over the past few decades.
At the beginning of the 21st century, Venezuela had the highest inflation rate of all the countries in Latin America. It was this that led to the introduction of the Bolvar Fuerte (VEF) in 2008. The Fuerte was introduced at an exchange rate of 1 Bolvar Fuerte to 1,000 Bolivares. But another worldwide collapse of oil prices in 2014 resulted in hyperinflation, shortages of food and medicine, and political instability. [Britannica]
In response, in February 2018 the government introduced the petro, a cryptocurrency (like Bitcoin). Rather than being fixed against the USD, the petros value was tied to the price of one barrel of Venezuelan crude oil and strengthened by Venezuelas reserves of gas, oil, gold, and diamonds.
Later that year, though, with hyperinflation still a huge problem, the government cut five zeroes off the Bolvar, and renamed it the Bolvar soberano (sovereign Bolvar or VES); 1 VES was worth 100,000 VEF.
In the past decade or so, the effects of this hyperinflation have been felt by the Venezuelan population. In the rural areas especially, there are serious water shortages and people suffer badly from malnutrition.
Many towns lack basic services, like electricity and the protection of police. According to Statista, in 2016, the countrys unemployment rate hit 16.38%, and in 2020 it had improved to average out at approximately 9.38 %.
While the last couple of years have seen a slight increase in economic stability, money transfers are one way to support individuals and the country as a whole. More money coming in means more spending power, and this has a positive impact on the economy as a whole.
So, if youre looking to support loved ones by sending money to Venezuela, heres what you need to know.
The exchange rate of the Bolvar
Exchange rates change by the minute and its important to know what the exchange rate is when you are looking to make a transfer (see our recent post on what to look out for in transfer rates and fees for more information).
In the last year, the exchange rate between USD and VES has steadily increased, with the VES losing value against the dollar.
- In February 2021, the lowest rate was 1 USD to 1,654,760 VES, and the highest was 1 USD to 1,869,260 VES.
- In the last year (2nd March 2020 to 2nd March 2021), the lowest rate was 1 USD to 69,787.9 VES and the highest was 1 USD to 1,869,260 VES.
The exchange rate between the British pound tells a similar story:
- In February 2021, the lowest rate was 1 GBP to 2,312,130 VES, and the highest was 1 GBP to 2,647,290 VES.
- In the last year (2nd March 2020 to 2nd March 2021), the lowest rate was 1 GBP to 81,825.4 VES and the highest was 1 GBP to 2,647,290
How you can send money to Venezuela
Small World currently offers our customers the option to transfer money to Venezuela by bank deposit.
Bank deposit offers you:
- A fast service: you can deposit Bolvar Soberano directly into your loved ones bank account in minutes.
- An easy transaction: whether you choose to use the Small World website or our app, your recipients are a few easy steps away from receiving their money.
- Security: Small World is financially regulated, making sure your money is safe.
- Social distancing: Hopefully this will be a thing of the past soon, but for now, bank deposit is a service that avoids all physical contact. Its perfect for keeping your family safe in uncertain times.
- Great partners: We know how important it is to work with banks that you recognise and trust. So, we have teamed up with partners in Venezuela like Banesco Contigo, Banco de Venezuela and BBVA Provincial.
And, if you choose to send money home using Small World, your first online transfer with us is fee-free. To get started, register now.