Artists use Venezuela’s devalued currency to make handbags, sculptures
In coming months, tens of thousands of Venezuelans — young, old, rich, poor, government supporters and opposition rabble-rousers — will get the equivalent of $10 deposited in their online accounts, no strings attached.
In a country reeling from hyperinflation and food and medicine shortages, organizers are hoping the scattershot donations will ultimately save lives — and perhaps pioneer a new way of delivering humanitarian aid.
The AirDrop Venezuela campaign is being organized by Airtm, a peer-to-peer network that allows users to buy and sell crypto and e-currencies using local cash. Founded in Mexico four years ago, the company claims to have completed 2.6 million transactions in more than 126 countries.
But Venezuela — where bolivar bills are literally not worth the paper they’re printed on and inflation is running in excess of 73,000 percent by conservative estimates — has been fertile ground for Airtm. There, people rely on the service and a network of the company’s brokers to exchange their anemic money for currencies, including virtual currencies, that retain their value — and can then trade them back into bolivares later to make purchases.
“We’ve been working in Venezuela a long time and it’s the most broken economy in the world,” Airtm CEO Ruben Galindo said. “The bigger the problem, the bigger the opportunity.”
Now the company is trying to turn its know-how into an aid drive. Earlier this year it began accepting donations of cryptocurrencies that will be delivered to Venezuelans who sign up for the gifts. So far, they’ve collected $272,000 (dollars) of their $1 million goal. And more than 60,000 Venezuelans have registered to receive the funds, which will be released starting in August.
The effort comes as the international community is struggling to get physical aid — food and medical supplies — into Venezuela, sometimes against the will of leader Nicolás Maduro. After denying there was a crisis in the country for more than a year, on Tuesday Maduro relented and allowed the International Red Cross to deliver aid. That was in sharp contrast to his reaction in February, when a convoy of goods being transported from Colombia was stopped at the border by a barrage of tear gas and blockades. The spectacle of aid trucks being torched (albeit, likely by accident) became a potent symbol of Maduro’s intransigence.
Sending money into the country is also complicated. Foreign exchange controls and punitive fees on wire transfers sap efforts to help. And being a money changer in Venezuela without the government’s explicit permission can land you in jail.
Steve Hanke is a professor of applied economics at Johns Hopkins University and an Airtm board member who has dedicated much of his career to helping foreign governments (including Venezuela in the 1990s) stabilize their currency.
While he’s steered clear of other crypto projects, he said he was drawn to the AirDrop initiative because it could become a valuable tool for aid organizations trying to reach the most vulnerable.
Most humanitarian organizations are still focused on delivering food, medicine and shelter to those in need, “but the logistics are complicated,” he said. “You have to build a warehouse, and then food and medical supplies are stolen; it’s all a bureaucratic nightmare.”
More recently, some organizations have been experimenting with cash distributions, harnessing the magic of unhindered capitalism.
Aid groups handing out money in Sub-Saharan Africa, for example, have seen that “spontaneously a market would develop and traders would show up bringing what the people wanted. Nothing was stolen. … It was very efficient,” Hanke said.
AirDrop takes that idea a step further. Rather than drive into a refugee camp with a truckload of money, with all the risks that implies, why not instantly and seamlessly send money to anyone with a simple mobile phone application?
“The idea of basically parachuting cash into war zones or zones where you have all kinds of restrictions on money transfers is pretty cutting edge,” Hanke said.
Once those credits are in Venezuela, for example, recipients will be able to use Airtm’s network to trade them for cash money or save them in a variety of e-currencies as a hedge against inflation.
The approach strikes some as haphazard. After all, those who want the $10 donations only have to register and send in selfies holding up their Venezuelan ID card. There are no other criteria. What’s to stop Venezuelan oligarchs and the well-to-do from signing up for the handouts?
Tim Parsa, the cofounder of Airtm, said the company is aware of the risks but believes anyone on the ground in Venezuela right now likely qualifies as “needy.” While Airtm considered working with local nonprofits to narrow down recipients they decided there were too many security risks. For example, they worried the government might seize databases and target recipients, Parsa said. Under the current setup, there’s no way for the government to know who’s getting the donations.
“What’s cool about AirDrop Venezuela is that it really highlights the ability of cryptocurrencies to jump borders and into the pockets of the neediest without intermediaries, without censors, you can’t stop it,” he said. “For people living with broken money, let’s give them stable money.”
The Maduro regime has tried to stop Airtm before, blaming it for the devaluation of the bolivar and threatening to jail its brokers. It’s hard to fathom how disruptive hyperinflation can be, but Venezuelans have become grimly accustomed to it.
Laudelina Andrade, 54, of San Cristobal, says she worked for years in neighboring Colombia and in 2017 deposited 200,000 bolivares in her Venezuelan bank account. At the time it was enough to buy about 100 bags of cement. When she withdrew it earlier this year — after the government had lopped off five zeros from the currency amid rampant devaluation — it wouldn’t buy her a hotdog.
“The government has robbed us right in front of our face,” she said.
The economic chaos is one of the principal reasons that Maduro is struggling to hold on to power and fending off his rival Juan Guaidó, the man that Washington and more than 50 nations consider the country’s legitimate president.
Galindo, the Airtm CEO, said he’s hoping his company can work with Guaidó in the future to help restore the economy.
Even so, he’s under no illusion that the AirDrop initiative will solve the country’s deep problems. But he does hope it will teach a few people about how they can protect themselves from a failing economy.
“The idea is to show people what they can do with this technology,” he said. “We’re not going to catalyze the adoption of cryptos across the entire country, but if we can teach 100,000 people how to use the technology, maybe it will lead to a broader movement.”
And Parsa said he hopes the experiment will help usher in a new way of helping those in need.
“I think this could be the future of donations,” he said, “People donating directly and people getting [donations] directly, and then helping themselves the way they know best.”