Andreina Cordero started the year skipping meals so her three kids could eat. Her husband, a construction worker, was out of a job. And the family’s savings had been devastated by the nation’s hyperinflation, limiting Cordero’s children to a diet of rice, beans, pasta and fried corn patties.
But the family got a break from their daily struggle to feed themselves this spring when a social worker enrolled them in a program run by a Silicon Valley startup that is donating cryptocurrency to hundreds of Venezuelan families.
Every week from February to April, Cordero received a deposit of EOS tokens through a cellphone app. She then traded the digital money for local currency through online transfers and used the funds to shop in market stalls.
“We finally got to eat chicken” Cordero said. “And there were also vegetables for the kids.”
The three-month trial in crypto transfers is now over, and the family is back to skipping meals and eating mostly beans and rice. But Cordero is thankful for the time that digital currency saved her kids from malnutrition.
“I’m very grateful for what they did for us” Cordero said. “It would be a blessing if something like that were set up again.”
Over the past decade, cryptocurrencies like EOS and bitcoin have become popular among investors looking to make large profits from a new and anonymous form of storing wealth.
But a handful of charities are also now using digital currencies to send relief directly to those in need, circumventing banks and companies that handle remittances. They’ve found the ideal testing ground in Venezuela, where the annual inflation rate by some estimates has soared to a staggering 67,000%, forcing millions to scavenge daily to feed themselves.
“Crypto has the highest likelihood of being helpful to people in places where money is broken” said Joe Waltman, executive director of GiveCrypto, the charity that provided direct transfers to Cordero and more than 100 Venezuelan families in Barquisimeto. “And there’s probably no better example of broken money right now than Venezuela.”
GiveCrypto’s program provided temporary help to vulnerable families by providing them with a weekly deposit worth around $7 — or about the same as Venezuela’s monthly minimum wage. The organization is also aiming to make people familiar with crypto apps so they can transfer their own earnings into digital currency and use it to buy goods, long after they have stopped receiving free deposits.
“We want to show that people who are not techies or investors can also benefit from this technology,” said Efrain Pineda, the project’s manager. “Anyone can use crypto to protect themselves from inflation and make their daily life easier.”
While many middle-class Venezuelans already try to protect their savings from hyperinflation by purchasing U.S. dollars and even gold nuggets, saving in crypto offers a solution to store wealth that may be physically safer than holding on to cash or precious metals in a crime-infested country. Online platforms that allow Venezuelans to buy and hold U.S. dollars provide a similar service.
Storing cryptocurrency presents greater financial risks than holding U.S. dollars, though, due to the wild swings in the value of some crypto assets, including bitcoin. But in Venezuela, where the local bolivar currency has lost two-thirds of its value this year, some merchants are willing to give this technology a shot.
In Barquisimeto, Leticia Luque, an informal merchant, said she began to accept crypto payments two months ago at the request of a social worker collaborating with GiveCrypto’s direct transfer scheme. She said the technology has helped her gain time to barter for better prices with suppliers and plan what she will buy next.
“We used to be in a rush to purchase goods before our bolivars lost their value” said Luque, whose husband travels every week to Colombia to stock up on packaged foods and basic goods that the couple re-sells out of their home. “Now we can take our time and we know that our earnings are in a safe place.”
Waltman said the Barquisimeto experiment was the first stage of a larger effort to promote the use of cryptocurrency in Venezuela, using “stable” currencies whose values have less fluctuation than bitcoin.
A similar initiative, known as an “airdrop,” is being developed by AirTM, a currency exchange platform based in Mexico City that plans to donate small amounts of cryptocurrency to 100,000 people in Venezuela this summer. So far, it has raised $300,000 from donations toward its $1 million goal.
The one-time payment of no more than $10 a person will provide only momentary relief. But the goal is also to encourage Venezuelans to engage with the AirTM platform.
“We want to show Venezuelans how to hold money outside their local currency,” said Joshua Kliot, the organization’s co-founder. “The biggest impact this could have is to crypto-ize the country.”
And it’s not just in Venezuela where nonprofits are attempting to help vulnerable people by introducing them to digital currency platforms. In Europe, Bitnation, a humanitarian agency, has enabled hundreds of refugees without bank accounts to receive direct donations through bitcoin accounts. In Jordan the World Food Program delivers aid to 100,000 Syrian refugees by creating digital currency accounts for each recipient, using blockchain technology but official currencies. To pay for goods, refugees only need to have their iris scanned in participating stores.
Paul Lamb, a nonprofit management consultant based in California, says the idea of distributing funding directly to people in need is becoming increasingly popular among humanitarian groups, because in some contexts it is cheaper than organizing the logistics required to physically hand out food or medicine. Usually these money transfers are made through debit cards in the local currency. But humanitarian groups are also starting to look at cryptocurrency.
“It’s harder for someone to steal cryptocurrency,” said Hugh Aprile, the Colombia country director for Mercy Corps, a nonprofit that has handed out debit cards to 7,000 Venezuelan refugees. “And in situations where you have high inflation, it can ensure the stability of the funds being transferred.”
But aid programs that distribute cryptocurrency also face several challenges.
In Venezuela, power cuts, like the one that recently left much of the country in the dark for days, knock out the internet connection needed to use cryptocurrency. And connections for many are iffy even when there is power. A tightly controlled currency system that punishes financial crimes with jail time has also discouraged some merchants from accepting cryptocurrency.
“Merchants who accept crypto and are public about it risk being inspected by the government,” said Randy Brito, the founder of Bitcoin Venezuela, a cryptocurrency education group.
Poverty is another barrier. Ariany Jaimes, a social worker who recruited participants for GiveCrypto’s project in Barquisimeto, said she had to keep some of the neediest people out of the program because they didn’t own smartphones with modern operating systems.
“We realize that this technology is not going to become widespread overnight,” Jaimes said. “But I do hope that these programs continue, because they make our life a little easier.”
OECD cuts growth outlook to post-crisis low
The trade war between the United States and China has plunged global growth to its lowest levels in a decade, the OECD said on Thursday as it slashed its forecasts.
The Organisation for Economic Cooperation and Development said that the global economy risked entering a new, lasting low-growth phase if governments continued to dither over how to respond.
The global economy will see its weakest growth since the 2008-2009 financial crisis this year, slowing from 3.6% last year to 2.9% this year before a predicted 3.0% in 2020, the OECD said.
The Paris-based policy forum said the outlook had taken a turn for the worse since it last updated its forecasts in May, when it estimated the global economy would grow 3.2% this year and 3.4% in 2020.
“What looked like temporary trade tensions are turning into a long-lasting new state of trade relationships,” OECD chief economist Laurence Boone told Reuters.
“The global order that regulated trade is gone and we are in a new era of less certain, more bilateral and sometimes assertive trade relations,” she added.
Trade growth, which had been the motor of the global recovery after the financial crisis had fallen from 5% in 2017 into negative territory now, Boone said.
Meanwhile, trade tensions have weighed on business confidence, knocking investment growth down from 4% two years ago to only 1%.
Boone said that there was evidence that the trade standoff was taking its toll on the U.S. economy, hitting some manufactured products and triggering farm bankruptcies.
The world’s biggest economy would grow 2.4% this year and 2.0% next year instead of the 2.8% and 2.3% respectively that the OECD had forecast in May.
Global Economy Screen with world map and man
Stephen Morton | Bloomberg | Getty Images
China would also feel the pain with the second-biggest economy growing 6.1% in 2019 and 5.7% in 2020, outlooks the OECD cut from 6.2% and 6.0% previously.
The OECD estimated that a sustained decline in Chinese domestic demand of about 2 percentage points annually could trigger a significant knock-on effect on the global economy.
If accompanied with a deterioration in financial conditions and more uncertainty, such a scenario would mean global growth would be cut by 0.7 percentage points per year in the first two years of the shock.
Meanwhile, uncertainty over government policies was also hitting the outlook for Britain as it lurches towards leaving the European Union.
The OECD forecast British growth of 1% in 2019 and 0.9% in 2020, but only if it left the EU smoothly with a transition period, a far from certain conclusion at this stage. The OECD had forecast in May growth of 1.2% and 1.0%.
If Britain leaves without a deal, its economy will be 2% lower than otherwise in 2020-2021 even if its exit is relatively smooth with fully operational infrastructure in place, the OECD said.
The euro area would not be spared from negative spillovers under such a scenario and would see its gross domestic product cut by half a percentage point over 2020-2021.
The OECD trimmed its forecast for the shared currency block, largely due to the slowdown in its biggest economy, Germany, which was estimated to be in a technical recession.
Euro zone growth was seen at 1.0% – down from 1.2% in May – this year and 1.0% in 2020 – down from 1.4% in May.
Boone said Germany’s economy had probably shrunk in the second and third quarters with a slump in car manufacturing, which accounts for 4.7% of German GDP, knocking three-fourths of a percentage point off German growth.
Netanyahu urges rival Gantz to form unity government
Israeli Prime Minister Benjamin Netanyahu delivers a speech to supporters of his Likud party after polls closed in the Israeli parliamentary elections.
Ilia Yefimovich | picture alliance | Getty Images
Prime Minister Benjamin Netanyahu called on Thursday on his main rival, former general Benny Gantz, to join him in a broad, governing coalition after Israel’s election ended with no clear winner.
A spokeswoman for Gantz, leader of the centrist Blue and White party, had no immediate response to the surprise offer from Netanyahu, head of the right-wing Likud party.
The change of strategy reflected Netanyahu’s weakened position after he failed again in Tuesday’s election, which followed an inconclusive ballot in April, to secure a parliamentary majority.
“During the election campaign, I called for the establishment of a right-wing government but to my regret, the election results show that this is impossible,” Netanyahu said.
“Benny, we must set up a broad unity government, as soon as today. The nation expects us, both of us, to demonstrate responsibility and that we pursue cooperation.”
On Wednesday, Gantz said he hoped for a “good, desirable unity government”. But he has also ruled out forming one with a Netanyahu-led Likud, citing looming corruption charges against the prime minister. Netanyahu denies any wrongdoing.
How Saudi Arabia failed to protect itself from drones, missile attacks
Smoke is seen following a fire at Aramco facility in the eastern city of Abqaiq, Saudi Arabia, September 14, 2019.
Stringer | Stringer
DUBAI — Questions have abounded all week as to how Saudi Arabia, the planet’s third-highest defense spender and steward of the world’s largest oil facility, allowed itself to fall victim to a drone and missile attack that wiped out half of its crude production in a day.
“The Saudi leadership has a great deal of explaining to do that a country that ranks third in terms of total defense spending … was not able to defend its most critical oil facility from these kinds of attacks,” former U.S. diplomat Gary Grappo told CNBC on Tuesday.
The stakes for the future of Saudi Arabia’s ability to defend itself are global. Brent crude saw its largest price jump ever as markets opened this week, and the commodity’s next moves depend heavily on Saudi oil giant Aramco’s ability to recover its production capacity and defend itself from similar attacks.
Investors are likely asking themselves how the kingdom could have left itself so vulnerable and what that means for the future of oil, global markets and the long-awaited Aramco public stock offering.
So how did the Saudis, who in 2018 spent an estimated $67.6 billion on arms — second only to the U.S. and China — fail to defend their economic jugular vein?
A target like ‘a Christmas tree’
It also doesn’t help that massive oil plants are just easy targets.
“Saudi oil assets are vulnerable for the simple reason that when flying over them at night, they stick out against the desert background like a Christmas tree,” Michael Rubin, a former Pentagon official and Middle East expert at the American Enterprise Institute, told CNBC in an email.
“This means that enemies don’t need high-tech GPS-guided drones, even though they might have them, but can also use relatively lower technology drones.”
Drone wreckage including one described as an Iranian Delta Wave UAV, foreground, from the attack on the Aramco Abqaiq oil refinery, sits on display during a Ministry of Defense news conference in Riyadh, Saudi Arabia, on Wednesday, Sept. 18, 2019. Saudi Arabia on Wednesday said the weekend attacks on the kingdoms critical oil infrastructure were “unquestionably sponsored by Iran.” Photographer: Vivian Nereim/Bloomberg via Getty Images
Vivian Nereim | Bloomberg | Getty Images
Twenty-five drones and missiles were used in the Saturday strikes on state oil giant Saudi Aramco facilities Abqaiq and Kurais, Saudi’s defense ministry said. While claimed by Yemen’s Houthi rebels, Saudi and U.S. officials say Iran was responsible, a charge Tehran has denied.
Dave DesRoches, an associate professor and senior military fellow at the National Defense University in Washington, D.C., told CNBC: “If an attack is of a different threat than the system was designed for — that is a low-altitude cruise missile instead of a high-altitude ballistic missile — then the system will not intercept it.”
Saudi Arabia’s current air defenses are ‘irrelevant’
Saudi Arabia boasts an arsenal of sophisticated and expensive air defense equipment. They have the American-made Patriot missile defense system, German-made Skyguard air defense cannons and France’s Shahine mobile anti-aircraft system, and they’ll soon have Lockheed Martin’s highly advanced THAAD (terminal high altitude area defense) interceptors.
But these are basically inconsequential, says Jack Watling, a land warfare expert at the Royal United Services Institute who advises Gulf militaries.
“The Patriots are kind of irrelevant,” Watling told CNBC in a phone interview. “The track record of Patriot engaging missiles of any kind is pretty awful, they very rarely hit the target.” The other issue, he says, is that it’s designed for shooting down high-altitude ballistic missiles, not the cruise missiles and drones used in Saturday’s attack.
“These were low-flying cruise missiles. They were coming in far below the engagement zone for Patriot. So you wouldn’t have tried to hit them with Patriot.” In its primary role of shooting down aircraft, Watling noted, the system does perform “very well.”
Aerial photographs found on open-source platforms show three Skyguard batteries placed around the targeted Abqaiq oil facility, which are slow-firing large caliber anti-aircraft guns, as well as French-made Shahine batteries from the 1980s.
Despite being permanently placed to protect these facilities, they Skyguards were not of much use either, Watling says: “The batteries around the site are firstly not the appropriate systems to engage cruise missiles, and there is no evidence that the Saudis have trained using their equipment.”
‘The Saudis… are largely inattentive’
To add to the Saudis’ weapon woes, their military personnel may not be up to the task either, according to Watling and several other experts who spoke to CNBC anonymously.
“The Saudis have a lot of sophisticated air defense equipment. Given their general conduct of operations in Yemen, it is highly unlikely that their soldiers know how to use it,” Watling said. He added that the kingdom’s forces have “low readiness, low competence, and are largely inattentive.”
“So if you’re a battery commander protecting against an oilfield which you never believed was going to come under attack, how carefully are you watching your radar? I’d be surprised if they’d even turned their radar on.”
Even those that do have the technical knowledge, Watling added, “are unlikely to be attentive enough to pick up small unmanned aerial vehicles or low flying missiles on their radar… quickly enough to coordinate countermeasures.”
The Saudi Defense Ministry did not respond to a CNBC request for comment.
In the Saudi military’s defense, oil infrastructure in the kingdom falls under the Ministry of Interior (MOI), military, noted Becca Wasser, a security analyst and war gaming expert at RAND Corp in Washington, D.C.
“Most of U.S. arms sales to KSA, particularly in air defense, have been to the military,” she wrote on Twitter on Monday. “The MOI, to my knowledge, isn’t well kitted out for this role as they tend to focus on domestic threats.”
So what does the kingdom need to do?
Barely a month has gone by since 2016 without Yemen’s Houthis firing rockets or missiles into the kingdom, which has been mired in a bloody war with the rebels since 2015. The Saudi-led offensive in Yemen has led to tens of thousands of deaths, according to the United Nations.
But to achieve the kind of point defense that could counter future attacks like Saturday’s, the Saudis need better short-range air defense systems and lower level search-and-track radar, experts say. “More importantly,” RUSI’s Watling added, “they would need soldiers who were competent at using them, and attentive.”
“If the Trump Administration is serious about confronting Iran in the region, it’s doing an abysmal job preparing for the small and big fights where the IRGC and its proxies can bring asymmetric weapons to bear,” Miguel Miranda, founder of website the 21st Century Arms Race, wrote last year in an op-ed for RealClearDefense.com.
“Genuine layered anti-ballistic missile defenses are needed to protect U.S. bases against hundreds of potential missile and rocket attacks by Iran in a future war.”
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