Payments in installments: another sales strategy in a Venezuela with almost no credit

Payments in installments: another sales strategy in a Venezuela with almost no credit

Some businesses in Venezuela have begun to offer their customers the possibility of paying for their products in various installments, a novelty in a country with limitations on all types of credit in public and private banks.

Home appliance sales stores have begun to offer refrigerators, televisions, air conditioners, laptops, and video game consoles since the beginning of February through a payment method with a “separate” system.

It is agreed to contribute an initial amount equivalent to 20% of the item’s price and extend subsequent payments in as many installments as the buyer wishes for two months.

The offer includes a warning against possible default, however. “Important: if the two months of the section pass (and the total payment is not honored), you lose the initial”, he tells the voice of america the employee of one of the businesses added to this practice.

A refrigerator with a capacity of 263 liters can be purchased in this format for $580, being able to pay for it with five installments of $116 in 60 days, explains one of its offers.

Thus, a 32 gigabyte tablet with a high-definition screen can be purchased by paying five installments of $28, as well as a console for five payments of $80.

It is one of the many ways that the average Venezuelan merchant has devised to “protect his heritage” in a critical country context, explained days ago to the Voice of America the specialist in economic markets Luis Vicente León, from the firm Datanálisis.

Then, another practice was known to maintain sales, that of offering discounts to customers in stores if the products are purchased with dollars or euros in cash.

Novelty in the country

The strategy of “set asides” or payments with credit can be common, almost routine, in multiple countries in Latin America and the rest of the world. It existed in Venezuela years ago, but today it is again a novelty in a nation mired in economic crisis for a decade.

The ideal remedy to combat inflation is the implementation of an economic and social agreement with broad political support that contains initiatives that stimulate innovation”.

Those financial straits have worsened in recent times: the official exchange rate has quintupled in the last 10 months, the local currency has depreciated rapidly, and the minimum wage barely exceeds $5 a month.

This occurred months after Venezuela formally emerged from what is considered the second longest hyperinflation cycle in modern history, with 50 consecutive months of average inflation of more than 50 percentage points every 30 days.

In this context, the government of Nicolás Maduro has determined extensive restrictions on access to credit for individuals and companies, both in public and private banks.

In 2019, the Executive Branch established that the minimum portion of total deposits that banks had to keep in the Central Bank, known as legal reserve, had to be 57%. A year later, that quota reached 93%, that is, that 93 of every 100 bolivars that circulated in Venezuelan banks had to be reserved at the Central Bank.

This has caused banks to have “less money available” to grant loans to individuals and companies, explains the economist and university professor Gustavo Machado.

credit limitations

The Madurista government reduced the legal reserve to 73% last month, still too high to stimulate the use of secondary or credit money, according to independent experts.

“The monetary authority seeks with this measure to limit the amount of money that circulates in the economy, with the idea of ​​avoiding significant increases in prices in general lines and particularly in the price of the dollar,” explains the Venezuelan teacher to the VOA.

These limitations have frozen, for example, the credit card limits of Venezuelans. Their available balances for consumption barely oscillate between 1 and 150 bolivars, that is to say, from just cents of dollars to little more than 6 dollars.

These are figures that prevent buying or paying for goods and services easily in the country with the second highest inflation in the world in 2022 (234%), only before Zimbabwe (339.7%).

The “ideal remedy” for the Venezuelan economy does not lie in specific commercial offers, but in “the implementation of an economic and social agreement” with broad political support, estimates Machado.

Innovation and increased productivity, he says, would be the key points to increase the purchasing power of citizens in a nation in trouble.

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Written by Editor TLN

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