A new Venezuelan fiat currency, ‘anchored’ to the nation’s crypto, the Petro, is expected to start circulating in the second half of August. The news was announced by president Maduro himself, along with other measures intended to improve the economic situation in the country. The ‘Sovereign Bolivar’ will have less zeros than the inflated ‘Strong Bolivar’.
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Pegged to the Petro? Bolívar Soberano Said to Bring Hope to Venezuela
Bolívar Soberano (Sovereign Bolivar), the new Venezuelan currency claimed to be anchored to the national cryptocurrency, the Petro, will start circulating on August 20, president Maduro announced on state TV. The Sovereign Bolivar will have five zeros less than the current, highly inflated “Strong Bolivar”, or Bolívar Fuerte (VEF), which replaced the original Venezuelan bolívar (VEB) about a decade ago. As for the oil-backed El Petro, Nicolás Maduro promised that the state-issued crypto “will end up being consolidated technologically and financially” to “permeate all the national and international economic activity.”
“The economic reconversion will start on August 20, definitively, with the circulation and issuance of the new Sovereign Bolivar, the new monetary cone that is going to have a new method of anchoring the Petro,” said the Venezuelan head of state, as quoted by the Telesur television network. The measure, president Maduro added, will serve “to stabilize and change the monetary and financial life of the country in a radical manner.”
Maduro went on to emphasize that a “productive, diversified and sustainable economic model must definitely be born” in the South American country, which has experienced hyperinflation and struggled with deep economic woes for years. The socialist leader stressed that the reconversion and the anchoring to the Petro represent “a great hope.” No details have been revealed on the exact mechanism of the link to the Venezuelan cryptocurrency.
Building New, Post-Oil Economic Model
“I ask for your confidence, I ask for your support, beyond ideologies and political positions, because Venezuela needs this change, the mafias are over!” said the leftist Venezuelan president, who also announced other measures aimed at improving the country’s suffering economy. Among them, a new decree assigning the Ayacucho 2 Block (over 29 billion barrels of oil) to Venezuela’s central bank to bolster its reserves, and legal amendments concerning crimes related to foreign exchange. “We have the correct vision of what the economic future in Venezuela should be, above all, we will achieve it,” Maduro stated.
According to the Bolivarian leader, his nation’s economy has been hurt by two major factors. “Venezuela has been trapped during these years by two fundamental variables: the exhaustion of the oil model […] and the establishment of a mechanism of economic warfare, as part of a political strategy,” he explained. The president believes that the “oil-dependent model has come to an end and it will not return,” and Venezuela has to continue its efforts to build a new economic model. This one, Maduro stressed, should be “diversified, productive, relevant, [and] advanced.”
The Venezuelan bolivar is one of the most inflated national currencies in the world. For example, the new 100,000-bolivar note was reportedly exchanged for less than $2.50 when it was issued last November. Inflation is now expected to reach 1 million percent by the end of 2018, according to the IMF, quoted by Bloomberg. The exact price of the bolivar is hard to determine as the restricted access to foreign convertible currencies in the country has created a sizeable black market with its own rates that differ considerably from the official one.
In March, Nicolás Maduro announced he “decided to remove three zeros from the current money and replace these bills with new ones.” The denomination of the bolivar was meant to “guarantee the country’s economic stability,” as he put it. The Venezuelan president showed specimen banknotes that were supposed to enter into circulation this past June but the launch was later delayed until August 4. The release of the newly announced Sovereign Bolivar, expected on the 20th of August, is supposed to fulfil that promise.
Do you think Venezuela will be able to overcome the hyperinflation with its new fiat anchored to the Petro cryptocurrency? Share your expectations in the comments section below.
Images courtesy of Shutterstock, Michael Novogratz (Twitter).
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