CARACAS, Venezuela: Due to high inflation and government restrictions, credit cards are becoming increasingly useless in Venezuela, making life more difficult for people who are already struggling.
During Venezuela’s economic collapse, the government of President Nicolas Maduro implemented strict lending requirements, such as only allowing banks to lend a maximum of 27 percent of their cash flow.
While the government loosened currency controls in 2019 and permitted local banks to open dollar-denominated accounts, many credit restrictions were kept in place.
Talking about her two credit cards, which both have low limits, administrator Lina Pereira from the city of Valencia said, “They are useless. My parents bought appliances and computers with their credit cards, but that’s a memory for Venezuelans,” as quoted by Reuters.
The country’s banking superintendency said that credit cards, which became vital for many people to make everyday purchases in supermarkets and pharmacies after inflation rose and incomes fell, accounted for only 2 percent, equivalent to some $16 million, of the credit portfolio of Venezuelan banks at the end of December 2022.
However, in 2012 that figure was 12 percent in Venezuela, while in neighboring countries, such as the Dominican Republic and Bolivia, credit cards currently account for 5 percent of the credit portfolios of banks.
According to the independent Venezuelan Finance Observatory, while some local credit cards have higher limits of between $30 and $100, they still are lower that the average monthly cost of feeding a family, which was $370 in December.
“Consumer credit is what gets punished. It’s the least likely to be given out. Often these credits weren’t just for buying appliances, but also for day-to-day expenses,” said Luis Arturo Barcenas, economist at analyst firm Ecoanalitica, as reported by Reuters.
Maduro’s government has attempted to lower inflation by increasing foreign cash supplies, limiting credit, reducing public spending and raising taxes.
The central bank has also ordered financial institutions to freeze 73 percent of deposits at the bank.
However, despite the measures, prices ticked up at the end of 2022, with annual inflation rising to 234 percent.
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