Venezuela revalued its currency on Monday. Following at least three years of the bolivar losing nearly all of its value against the dollar and locals either printing their own neighborhood currency or bartering, PSUV opted for new banknotes to solve the problem.
They took off five zeroes, because—as we now know—the bolivar faces five-digit inflation on an annual basis. They can say the new bolivar is worth one dollar if they want to. At the rate the economy is going, it will be wortSPAM PLEASE REPORT ME by September 30.
The move devalued the bolivar by a whopping 96%, after it had already fallen by at least half that over the last three years. The new exchange is 6 million bolivars to one dollar. President Nicolas Maduro can now claim that socialism has succeeded in making everyone millionaires.
Maduro was on an economic policy rampage last week. Besides a new currency, he enacted new gasoline subsidies only targeted to low-income individuals and raised the corporate tax rate. The higher tax rate means more tax evasion. In addition to raising taxes for businesses, he increased the minimum wage.
Reuters reporters in Caracas reported late Monday that the new economic policy initiative was leading more locals to plan their exit. Most see it as a failure less than three days after going into effect.
“I am looking for flights to leave on Wednesday, any way I can,” a man named Jose Narvaez, a 43-year-old carpenter, told Reuters. “I am sure this is going to get worse because the man’s ideas lack all logic,” he says of Maduro.
Venezuela has lost over a million people in the last year to Colombia alone as the economic crisis has turned into a migrant crisis for the country’s neighbors.
Venezuela is swept by economic chaos as new currency plan takes effect
Under the devaluation plan, Maduro announced that 3,600 new bolívares would now equal one petro, a digital currency he created in February, which U.S. Treasury Department officials have called a scam. One petro equals the price of a barrel of oil, or about $60. So one dollar, under his plan, would equal about 60 new bolívares or 6 million old ones.
That represents a 90 percent devaluation from the previous official exchange rate. But that rate was accessible only by state entities. In effect, the devaluation is meant to bring the official exchange rate closer to its value on the black market.
There were early signs that the plan had failed to stabilize the economy. Before Maduro’s announcement on Friday, for instance, a kilo of peaches — or 2.2 pounds — cost about 1.1 million bolívares. By Tuesday, prices had almost doubled, surging to 2.1 million old bolívares, or 21 new ones. The black market rate for the dollar on Friday was roughly between 7 million and 8 million bolívares — a figure that surged to about 14 million old bolívares, or 140 new ones, on Tuesday.
Victor Flores, 56, a manager at a carwash in a part of Caracas that was long an opposition stronghold, said he never considered taking part in the strike.
“We don’t believe in the opposition anymore,” he said. “We’re living a terrible situation, and they have never been strong enough in their response.”
The ongoing economic crisis in Venezuela is driving people to leave the country by the hundreds of thousands—often crossing borders on foot—seeking better lives in Brazil, Colombia, Ecuador, Peru, and beyond. They are fleeing a nation that now experiences frequent power outages and water shortages, and suffers from a severe lack of food and basic medical supplies.
Hyperinflation has become such a burden that new currency was recently issued, at a conversion rate of 100,000 bolivars (old currency) to 1 sovereign bolivar (new). The IMF estimated that Venezuela’s rate of inflation might reach 1,000,000 percent this year.
Venezuela ‘paralysed’ by launch of sovereign bolivar currency
Venezuela came to a standstill on Tuesday as the country tried to deal with its newly introduced currency.
Thousands of businesses closed in order to adapt to the “sovereign bolivar”, and many workers stayed at home.
President Nicolás Maduro launched the new banknotes on Monday, revaluing and renaming the old bolivar currency.
The government says this will tackle runaway inflation, but critics say it could make the crisis worse. The notes went into circulation on Tuesday.
President Maduro had declared Monday to be a bank holiday.
h/t Digital mix guy