HBD and "dollars" in Latin Amercia - issues, treatment and concerns.

Here on HIVE we have our very own "stable" coin, and the word "stable" means its tied to the US dollar. Some discussion has been made around this fact, of course with a Hard Fork we could change it to be "stable" around some other asset, but for now we have the US dollar - one of the benefits of the dollar is that it "spends" around the world (for the most part), and definitely when compared to other such fiat currencies. Its "the most recognized" - this is true and obvious.

_{Source: "How stable is the dollar?" Google Image Search}

Whatever you may think about the stability of the dollar, it cannot be denied that there is no other contender in the "global marketplace" in terms of "what things are priced in". Bitcoin, bless its heart, is priced in dollars.

But there is another issue that has emerged, a sneakier and more mysterious social aspect of money, which I stumbled onto originally from an off-handed comment from a friend, then I reached out to some people and discovered... that all is not what it seems with "the dollar". I looked around for information regarding this issue I found - but no one has ever written about it before... for a very specific reason 👀

After a bit more research about this mystery that has stayed secret - its actually against the law to talk about it 👀👀

So if you are hooked, let's jump in and talk about some issues with the dollar in Latin America that we on HIVE have inherited into our HBD.

Money Spends, if it Spends - its money (La Plata se Gasta, si gasta - es plata)

"What's money anyway? Money spends. If it spends, its money."

This practical and working definition of "money" is something that I have developed over this year of "on the ground" work in Latin America, talking to people about tokens, stable coins and commerce. I'm not completely confident its a perfect definition, but its good - the people smile and nod - plus it sounds cool in spanish.

But "taking the dollar", allowing it to be spent does not necessarily mean that it will be taken at par, so let's dive a little deeper into spending currencies when they are not local.

Differential pricing

This is a fascinating economics lesson all around - charging people different prices for the same thing. In Guatemala I was surprised to find that not only is this common, expected behavior, but that its government approved and utilized - doesn't matter the currency. Whether in Quetzales or Dollars, foreigners and tourists are charged more. Its 5Q to get into a park if you are a local, 10 if you are Guatemalan but not local, and 40 if you are a foreigner - that's the law.

Now this is not totally uncommon in Colombia - but the difference here is that as a culture we all pretty much agree this is "wrong", or "bad". Not only do people talk about it as if it were "descarado" behavior, many versions of this behavior are actually illegal and some high profile cases have been prosecuted. "Price Gouging" can even be considered a scam - even while being government sponsored in a place like Guatemala.

_{Source: "Price Gouging in Cartagena" Google Image Search}

There are even several versions of this in the good ol' US of A. The most common are Senior Citizen discounts, which are literally the same thing but backwards - tiered pricing, but framed as a discount. Price gouging is illegal but preferential discounts are "a-ok", according to our cultures and traditions - so don't think this is just some sort of Latin American backwardness. Whole economics courses can be taken on pricing models, and we haven't even gotten into the good stuff yet.

Exchange rates

Now, there is another level here, and that is exchange rates (friction). In Guatemala, you could pay in dollars at many places at 7.5Q per dollar, while the official exchange rate was ~7.7. This is not the same as differential pricing, this represents exchange friction - the cost in time and inconvenience for a vendor to turn different currencies back into their own. Even banks do this, working the spread on currency transactions.

But now we have all the pieces of the puzzle that we need to get into the really interesting stuff - so let's travel now to Venezuela.

Illegal to not Price Gouge?

Source: Banco Central de Venezuela

The Central Bank of Venezuela publishes an official exchange rate with the dollar. Merchants are legally obliged to accept this rate for dollars. But the rate in "the market".... is different. This is "the black market", officially of course, but anyone "in the know" with dollars would be much better buying Venezuelan Bolivares on Binance P2P and shopping with "Bs"

Source: Binance P2P Trade Center

If we compare the Central Bank's 171.6 rate to the recently achieved rate of 260.6 rate on Binance P2P, we can see that shopping in dollars is something like 51.8% more expensive than shopping in local Bolivares.

And the hardest part of this is, in many ways its illegal to talk about it - definitely to promote it. People and companies in Venezuela are not apt to write or publish articles about black market strategies or publically transact at rates that are illegal and center around a sometimes sensitive (or censored) topic in the country. But this is all that it comes down to - an "official" markup in dollar based spending; the internal economy treats the dollar below par value.

In conclusion...

I believe that initiatives such as #spendHBD are going to face a difficult time in Venezuela, as it will be hard for the blockchain to manage to incentive transactions enough to overcome a large local effect on the purchasing power of dollars especially in transparent ledger transactions (ie "in public").

HBD should thus be marketed as a savings product for situations and environments such as this, a use for which it is also quite suited.

Please leave your detailed feedback below in the comments.

Freedom and Friendship