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Confusion reigns as Venezuela braces for release of new banknotes
CARACAS, Aug 20, 2018 (BSS/AFP) – Beleaguered Venezuelans braced Monday for
the rollout of President Nicolas Maduro’s radical new plan to curb the
spiraling hyperinflation that has thrown their oil-rich, cash-poor nation
into turmoil.
Caracas is issuing new banknotes after lopping five zeroes off the
crippled bolivar, casting a pall of uncertainty over businesses and consumers
across the country.
“There will be a lot of confusion in the next few days, for consumers and
the private sector,” said the director of the Ecoanalitica consultancy,
Asdrubal Oliveros.
“It’s a chaotic scenario.”
Other measures — revealed by Maduro in a speech to the nation late Friday
— include a massive minimum wage hike, the fifth so far this year.
As it stands, the monthly minimum wage — devastated by inflation and the
aggressive devaluation of the bolivar — is still not enough to buy a
kilogram (2.2 pounds) of meat.
The embattled Maduro, a former bus driver and union leader, said the
country needed to show “fiscal discipline” and stop the excessive money
printing of recent years.
But economists say the radical overhaul could only make matters worse.
In the capital Caracas, residents were skeptical about the new measures.
“Everything will stay the same, prices will continue to rise,” 39-year-old
Bruno Choy, who runs a street food stand, told AFP.
Angel Arias, a 67-year-old retiree, dubbed the new currency a “pure lie!”
Three of the country’s leading opposition groups — Primero Justicia,
Voluntad Popular and Causa R — have rejected the reform plan and called for
a day of protest on Tuesday.
MORE/MR/ 1207 hrs
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– New currency, old woes –
The new currency, the sovereign bolivar — to distinguish from the
current, and ironically named, strong bolivar — will be anchored to the
country’s widely discredited cryptocurrency, the petro.
Each petro will be worth about $60, based on the price of a barrel of
Venezuelan oil. In the new currency, that will be 3,600 sovereign bolivars —
signaling a massive devaluation.
In turn, the minimum wage will be fixed at half a petro (1,800 sovereign
bolivars). That is about $28 — more than 34 times the previous level of less
than a dollar at the prevailing black market rate.
– Fuel subsidy cuts –
The socialist president also announced a curb on heavily subsidized fuel
in a bid to prevent oil being smuggled to other countries.
Subsidies would only be available to citizens registering their vehicles
for a “fatherland card,” which the opposition has decried as a mechanism to
exert social control over opponents.
Fuel subsidies have cost Venezuela $10 billion since 2012, according to
oil analyst Luis Oliveros, but without them, most people would not be able to
buy fuel.
Oliveros also warned that the new bank notes will crumble “within a few
months” if hyperinflation is not brought under control.
The International Monetary Fund predicts inflation will hit a staggering
one million percent this year in Venezuela — now in a fourth year of
recession, hamstrung by shortages of basic goods, and paralyzed public
services.
“Don’t pay attention to naysayers,” Information Minister Jorge Rodriguez
said, pushing back against criticism of the plan. “With oil income, with
taxes and income from gasoline price hikes… we’ll be able to fund our
program.”
Oil production accounts for 96 percent of Venezuela’s revenue — but that
has slumped to a 30-year low of 1.4 million barrels a day, compared to its
record high of 3.2 million 10 years ago.
Maduro’s predecessor Hugo Chavez stripped three zeroes off the bolivar in
2008, but that failed to prevent hyperinflation.
BSS/AFP/MR/ 1207 hrs