Thanks to the increasingly serious economic crisis in the country, the Venezuelan government has instituted measures that can be called "strange" and "irresponsible"
During the last few years, the economic crisis in Venezuela has worsened year after year. Evidence of this is the inflation rate of 128.4%, which was reported by the Finance Committee of the National Assembly at the end of June. Additionally, according to the International Monetary Fund, the GDP was US $ 100,845 million, US $ 109,240 million less than in 2017.
Given such a crisis, which has come at least since 2014, the government of President Nicolás Maduro has devised different strategies to help the country overcome the economic crisis it is going through. However, the continuous increase in the situation is evidence of the failure of the strategies that have been implemented. Among these, there are some that stand out for their rarity. These are some of them.
1. The circulation exit of the 100 bolivars bill
On December 11, 2016, Nicolás Maduro unexpectedly announced the circulation of the 100 bolívares ticket, the highest denomination in Venezuela at the time, stating that this measure would be effective in the next 72 hours. At the time, the Venezuelan leader argued that this would be executed to "eliminate the smuggling of bills that is being developed from Cúcuta" and argued that this would not continue to "looting" Venezuela. Given the surprising announcement and the short time to change the 100 bolivars bills at the points authorized by the government, there was chaos in the banking entities and public demonstrations.
This measure has been a complete failure, since, as reported by the Venezuelan channel VPI TV, the lack of cash and the economic crisis of the country has forced the government to extend again and again the circulation of the 100 bolivars bill. After thirteen extensions, the immortal banknote, as it is known by Venezuelan citizens, went out of circulation on May 20, 2018 to give rise to a new monetary cone with larger denomination banknotes.
2.The bread war
Due to the lack of flour production in Venezuela, this product must be imported like many others for the country's production. For this reason, according to the BBC, the financial crisis has forced the bakers of the country to sell less and less diversity and quantity of bread at prices higher than normal, making bread a luxury.
Nicolás Maduro, dissatisfied with the strategies of financial survival of the baker's guild, called it "the wheat mafia" and stated that the federation of bakers had declared the "war of bread" to the government. In response to the situation, in February 2017, it was decreed that bakeries that failed to comply with the new norm of producing bread from its opening until its closure, using 90% of the raw material to produce bread tap (the cheapest and demanded by its price), would be temporarily occupied by the government and transferred to the CLAP (Local Committees for Supply and Production).
One month after the announcement, the bakery Mansion's Bakery in Caracas was taken by the government, generating conflict among citizens. According to El Nacional, three days after the occupation, a member of the intervention board affirmed "there is no bread because the toilet is being cleaned". The same article in El Nacional reported that minutes later quill loaves were extracted from the store and taken to a private car. According to an employee of the bakery, the intervention board was taking the loaves in trucks to eat the merchandise themselves, aggravating the situation of the population.
3. The new coins
Given the hyperinflation and the low value of the Venezuelan bolivar, since 2016, the government of Nicolás Maduro has been introducing bills of increasing denomination: from 500 to 100,000 bolivars. The measure culminated in a new currency denominated "sovereign Bolívar".
By early 2018, Venezuela's financial situation reached such a low point that, according to Bloomberg, any bill of less than 100 bolivares was being used as confetti in baseball games. The supermarkets have been having problems with the sale of any product whose price depends on the weight (such as meat or vegetables); since the weights can only show 6 digits and the price can easily exceed that. Bloomberg, for March 2018, recorded that one kilogram of ham was costing 1'480,000 bolivars.
The government's response was to announce the exchange of strong bolivars (those used since 2007) to the sovereign bolivar, which would eliminate three figures of the old notes. However, according to Deciphered, the sovereign bolivar died before it was even born.
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This coin, which will be released on August 4, 2018, has already begun to depreciate. According to the economist Ángel Alvarado, member of the Venezuelan Parliament's finance committee, inflation has already affected the value of the sovereign bolivar. Alvarado said that "with inflation greater than 100% each month that currency is worth half or less than half. New families of bills are needed each month at these inflation levels. In addition, printing bills with so little value is very expensive for the Central Bank".
In addition to the sovereign bolivar, Nicolás Maduro announced at the end of 2017 the installation of a Venezuelan cryptocurrency, the Petro, backed by the Venezuelan oil reserves. The president of Venezuela affirmed that the Petro "comes to strengthen" the economy of the country and hopes that with the cryptocurrency, Venezuela will be "a global reference of sovereignty in front of the big global financial centers".
Some of the critics of the government affirm that this is only another strategy that will fail and that will generate even more national debt. For example, José Guerra, an opponent of the National Assembly, described the petro as "a debt operation that tries to avoid parliamentary control." The truth is that, as reported by the BBC, it is still unknown if the Venezuelan cryptocurrency will be successful or not. In any case, it is clear that investing in it is highly risky.
Apart from the Venezuelan official currency, the country has seen the emergence of at least three parallel currencies this year.
- On the one hand, in the socialist commune El Panal 2021 the "honeycomb" coin began to circulate, whose value, according to El Tiempo, corresponds to 5,000 bolivares per unit.
- On the other hand, the "Elorza" currency was issued on March 19, 2018, during the town's festivities, in the town hall of Elorza.
- Finally, in April 2018, the mayor of Caracas launched the "Caribbean" currency, whose unit is equivalent to 1,000 bolivars.
Both CNN and Excelsior reported that these coins were introduced with the hope of solving the problem of the lack of cash in different areas of the country.
LatinAmerican Post | Juan Diego Bogotá
Translated from “3 medidas extremas: Las descabelladas respuestas de Maduro a la crisis”