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[Markets] Money On The Edge: Being Resilient In Times Of Turmoil

Via The Open Money Initiative,

How do you constantly adapt to endure ever-worsening conditions?

The infrastructure in Venezuela is deteriorating fast, causing ripple effects in an economy that is already collapsing. The power can go out for days, at times taking down the communication networks that people rely on to live and work. Spare parts for vehicles are hard to come by, so public transport often stops being dependable, which prevents many from making it to work, which disrupts yet another vital service.

Policies and economic realities also mutate quickly. In the last three months since we completed our study, hundreds of stores in Caracas have started to openly sell merchandise in dollars cash — unthinkable before– and banks have all but stopped offering credit lines — something many relied on for making ends meet.

Developments like these are profound. They force everyone to reinvent the mechanisms they use to survive. In this post, we highlight three key areas where Venezuelans need to think on their feet to be resilient to changes that often feel hostile, and we’ll start the discussion on how we might support and enhance this resilience.

Insight #1: Venezuelans are enduring constant swings between modern and primitive existences

As infrastructure degrades, basic utilities like power, water, and internet become increasingly inconsistent. Services like public transport and garbage collection are also affected, forcing most people to break their life and work routines. It becomes impossible to plan. The best people can do is improvise, while leaving some margin for emergencies that their loved ones might find themselves in. The modernity people were used to gives way to a more disconnected and chaotic way of life.

In our study, we documented experiences of a nationwide, days-long blackout. Lorenzo, age 26, who worked informally buying and selling products in Caracas, told us how point of sale systems and online payment systems were all down. “The only businesses that were open were the ones accepting cash”, he said.

Cash is very scarce, so commerce often stalls when digital payment systems don’t work.

During the more minor outages, people commented that loading full websites was out of the question, but they could still use WhatsApp to send short text updates. This is promising. Payment systems don’t have to use a lot of data, so if they were designed to be resilient, commerce could carry on even under difficult conditions.

We can ask ourselves: how might we…

— enable digital payments in low power and connectivity environments?

— create communication, coordination and exchange systems that are usable even in low connectivity or offline environments?

— enable people to serve basic needs without depending on the government?

Insight #2: Venezuelans increasingly rely on income from the informal economy rather than stable salaries

Paid salaries, often set annually or monthly, don’t keep up with inflation. Professionals that thus far relied on their jobs to sustain them often seek additional income to supplement their shrinking wages. This income often comes from dabbling in informal commerce and brokering money exchanges.

Business owners and entrepreneurs have to be resourceful to make ends meet. Sometimes, this entails changing the good or service the business is providing, or seeking income in a foreign currency. Óscar, a 50-year-old car shop owner, saved his business by starting to offer bulletproofing services for wealthy customers, who were ready to wire him tens of thousands of dollars.

People in once-stable careers have also needed to reinvent themselves. Sara, a 37-year-old tenured professor from Mérida, now works part-time for a Panamanian website that helps students with their class assignments. “They still pay me in bolivars, but I make more there than I do as part of the university’s immunology faculty”, she says.

We also spoke with people that relied on unconventional sources of income. Ana María, a 22-year-old engineering student, started mining bitcoin in her basement, taking advantage of low electricity prices and the once-stable electrical service in Caracas. She tells us: “my father lost his job, and my mom still works as a teacher, but it’s not enough for me and my sisters. The miners are now our main source of income.”

Armed with this new understanding of the necessity for reinvention, how might we…

— connect remote workers with companies seeking their skills from abroad?

— expand cryptocurrency mining as an option for more people to derive income?

— enable workers that are essential for society to continue in their day jobs while still feeling economically secure?

Insight #3: Leaving Venezuela is like going from a sinking ship to a lifeboat with few provisions.

People thought their migration would be an adventure, but many didn’t anticipate the loneliness.

The situation in Venezuela is so dire that people often feel relieved when they decide to leave the country. However, this can be short-lived. As soon as they make it abroad, many realize that while they have shed some of their problems, they have replaced them with unforeseen challenges.

Emigrating means having to leave behind family, friends, and work networks. It can also demand abandoning your possessions, your car, your home, and your financial resources.

Lorena, a 48-year-old baker that made it from Caracas to Bogotá, illustrates this well. “Despite being a dual citizen, I still feel like a foreigner in Colombia. I don’t have anything here. I sold everything and with the money I brought from 15 years of work, I could only live for three months”, she says.

Starting in a new place can also mean being undocumented and therefore devoid of government resources and legitimate employment opportunities. Anton, a 30-year-old former landowner, tells us “I’m an illegal. Here I feel like nothing, and I have nothing to lose”. He earns about $15 a day playing and singing in the streets of Medellín. Juan, age 28, had a bit more luck: he was able to open a restaurant. “Our business is our visa. If it closes, we will have to leave”, he says.

Knowing that stability is still a far-out goal for those that make it out, how might we:

— create tools that help migrants access essential services like banking?

— help people understand and prepare for the challenge they will face when emigrating?

— connect new migrants or migrants-to-be with those who’ve emigrated successfully?

— enable skilled migrants to find jobs in the new places they settle in?

Conclusion

People must be resilient to overcome the constant sacrifices and the unpredictable swings that result from Venezuela’s collapse. We can design systems that are technically robust, that can offer fallback options, and that can help guide people through uncertainty.

Stay tuned for future posts — we’ll discuss how to provide open access to the financial instruments people want.

Published:8/15/2019 4:56:27 PM
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