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Bolivia Turns to Cryptocurrency for Energy Imports Amid Dollar and Fuel Shortages

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Bolivia’s state-run energy company YPFB has announced plans to use cryptocurrency to pay for energy imports, as the country grapples with a severe shortage of dollars and fuel. This move comes amid a significant decline in Bolivia’s foreign currency reserves, which has been exacerbated by years of decreasing exports of natural gas. The fuel crisis has led to long lines at gas stations and sporadic protests across the country.

A spokesperson for YPFB confirmed that the company has received government approval to implement a digital asset payment system to help meet the country’s growing fuel demands. “From now on, these cryptocurrency transactions will be carried out,” the spokesperson said, explaining that the initiative aims to support Bolivia’s national fuel subsidies, which are under strain due to the shortage of hard currency.

Although YPFB has not yet begun using digital currency for energy imports, it plans to do so in the near future. Bolivia, once a net energy exporter thanks to its large natural gas reserves, has seen its reliance on energy imports increase as domestic gas production has declined due to a lack of significant new gas discoveries.

Venezuela’s Currency Depreciation Risks Undoing Inflation Gains

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Depreciation of the Bolivar Threatens Economic Stability

Venezuela’s recent currency depreciation is raising concerns that years of progress in reducing inflation could be undone. After a period of relative economic stability following the hyperinflation of previous years, Venezuela is facing rising prices once again, as the government’s decision to allow the bolivar to float has triggered depreciation, causing a ripple effect across the economy.

  • Government’s Shift in Policy: Under President Nicolás Maduro, Venezuela had made strides in taming inflation through a series of orthodox policies, including credit restrictions, public spending cuts, and the pegging of the bolivar to the dollar. This approach helped bring inflation from over 100,000% to more manageable levels. However, since mid-October, the government has allowed the bolivar to float freely, resulting in a depreciation from 36.5 bolivars to the dollar to about 45 bolivars.
  • Impacts on Inflation and the Private Sector: The sharp depreciation is contributing to a rise in inflation, with prices increasing by 12% over nine months. This shift in exchange rate policy is expected to push inflation even higher in the final quarter of 2024, with forecasts suggesting the rate could hit 35% to 40%, well above the government’s earlier projection of 30%.

The Strain of Exchange Rate Adjustments

Economists warn that the currency’s depreciation will place pressure on the already struggling Venezuelan economy, particularly affecting imports and local production. With the bolivar’s fall making imported goods more expensive, domestic industries are under strain. Venezuela’s economic system relies heavily on oil income, and the central bank’s reduced foreign currency sales are exacerbating the situation.

  • Impact of Reduced Foreign Currency Sales: The central bank had previously injected foreign currency into the market to stabilize the bolivar, but its sales have dropped significantly. In July, it sold around $800 million, but by October, this had fallen to just $400 million. This reduction has left businesses scrambling to secure dollars for imports, leading to increased inflationary pressures.
  • Private Sector Concerns: Venezuelan businesses are facing significant difficulties in acquiring foreign currency to import goods, and many are depleting their inventories in response. The government has allowed some sectors, like food and medicine, to use foreign currency for imports, but other businesses are restricted to using central bank promissory notes tied to the official exchange rate, which remains problematic.

Government’s Response and Future Outlook

Vice President Delcy Rodríguez recently highlighted the need for greater control over foreign exchange usage, warning against frivolous spending of foreign currency in a country under blockade. However, the government has remained largely silent on its broader strategy for addressing the ongoing depreciation.

  • Inflation and Economic Uncertainty: The government faces a critical challenge in balancing the need to stabilize the currency with the reality of limited foreign exchange reserves. While some economic experts believe the bolivar’s depreciation was necessary, the rising inflation threatens to undo the gains made over the past few years in controlling prices.
  • Long-Term Concerns: Venezuela’s economic future remains uncertain. While devaluation may have been necessary to address the overvalued currency, it could lead to a new wave of economic hardship for Venezuelans, particularly as many still live under the strain of high inflation and limited purchasing power.

Cuba Begins Gradual Restoration of Power Following Island-Wide Blackout

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Cuba started restoring electricity on Friday evening after an island-wide blackout left most of the country in darkness for several hours. The power outage was triggered by the collapse of the Antonio Guiteras power plant, one of Cuba’s major oil-fired generation facilities. The blackout, which affected the vast majority of the country’s 10 million residents, left cities and towns in complete darkness, with Havana, the capital, among the hardest-hit areas.

As of mid-evening Friday, power had returned to some pockets of Havana, including critical infrastructure such as hospitals. However, the majority of the population was still without electricity, enduring another night of hardship. The state-run electricity provider UNE announced it aimed to restart at least five of its oil-powered generation plants overnight, which it hoped would gradually restore power to more regions across the country.

In a bid to prevent total grid failure, the Communist government had earlier in the day ordered schools and non-essential businesses to close and sent most state employees home. However, by midday, the Guiteras plant went offline, causing a complete blackout. Officials are working to repair the facility, although they have not provided specific details on what caused the failure.

The blackout is the latest blow to the country, where residents are already grappling with severe shortages of food, fuel, water, and medicine. Streets in Havana were eerily quiet as commerce came to a halt, with locals sitting on doorsteps to escape the stifling heat. Tourists in the city were left frustrated by the situation, unable to access internet services or find food in restaurants due to the lack of power.

“We went to a restaurant, and they had no food because there was no power. Now, we are also without internet,” said Brazilian tourist Carlos Roberto Julio, who had only recently arrived in Havana. “In two days, we have already had several problems.”

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Cuba’s Prime Minister Manuel Marrero blamed the worsening blackouts on the country’s deteriorating energy infrastructure, fuel shortages, and rising demand for electricity. In a televised address, Marrero highlighted that recent adverse weather conditions, including strong winds from Hurricane Milton, had made it difficult to transfer fuel from ships offshore to the power plants.

The government also attributed the island’s fuel shortages to the long-standing U.S. trade embargo and sanctions imposed under the Trump administration, which they argue have hindered their ability to acquire the necessary fuel and spare parts to keep the power plants running.

“The economic war and energy persecution by the United States are the primary causes of our complex energy situation,” Cuban President Miguel Díaz-Canel said in a message posted on X (formerly Twitter).

However, the U.S. government refuted the claim, stating that Cuba’s energy crisis was not a result of U.S. policies. A spokesperson from the National Security Council reiterated that the U.S. was not to blame for the blackout. The State Department noted it was monitoring the potential humanitarian impact of the outage, but added that the Cuban government had not requested any assistance.

For many Cubans, the nationwide blackout was yet another difficult night in a country used to enduring power outages. Carlos Manuel Pedre, a local resident, shrugged off the situation and turned to playing dominoes with friends to pass the time. “In the times we’re living in, with everything happening in our country, the most logical entertainment is dominoes,” Pedre said. “We’re in total crisis.”

Cuba’s power shortages have been exacerbated by a sharp reduction in fuel shipments from its largest supplier, Venezuela. According to shipping data, deliveries have halved in 2024 compared to the same period in 2023, as Venezuela struggles with its own energy issues. Other allies, such as Russia and Mexico, have also significantly reduced fuel shipments to Cuba, forcing the island to purchase fuel on the expensive global spot market, further straining its already fragile economy.