A 2.4kg chicken beside 14,600,000 bolivars – Reuters/C. G. Rawlins.The Central Bank of Venezuela (BCV) announced yesterday the third currency conversion in just over a decade. In other words, from October 1st, six zeros from the national currency will be eliminated and the digital bolivar will also circulate across the country's virtual borders. Venezuela had already tried this maneuver in 2008 when it eliminated three zeros on the bolivar and introduced the bolivar strong. In 2018, once again, the monetary authorities cut five zeros from the currency. And now again another attempt to “cut inflation”, Maduro?
Will cutting zeros do it?
The main objective of the change, according to the government, is to promote the economic recovery of the country, which has suffered from hyperinflation for four years and is facing a generalized recession. But from a monetary point of view, this doesn't make much difference, as the salaries of Venezuelans will also be reset to zero. The use of the bolivar in the digital version does not have much effect either. Despite the reduction in transaction costs, the emerging country's economy would need structural reforms to try to stabilize the population's purchasing power. In addition, the country is highly dependent on dollars entering the local economy through international remittances. In 2020, inflation exceeded 4,000% in 12 months in the country. To try to protect themselves from the exchange rate devaluation and the loss of purchasing power, Venezuelans resort to the dollar and cryptos. According to the Venezuelan think tank Ecoanalitica, around 66% of all financial transactions in the country are already made in the American currency. Source: Coin Dance, April 2022 Meanwhile, due to the popularization of Bitcoin, trading in cryptocurrencies paid with Venezuelan bolivar has increased, according to data from LocalBitcoins. type of investment. In many parts of the country, the internet connection is often very weak, expensive and limited.
save yourself who can
Still, cryptocurrencies are the light at the end of the tunnel for some Venezuelans, as this is the easiest and most cost-effective way to allow their exiled relatives to send money home. Widespread dissatisfaction with the country's socialist rulers has forced 5 million Venezuelans, out of a total population of 30 million, to leave their country. progressive process of modernization of its payment systems and that recently started the operations of the new Financial Message Exchange System, made locally, by Venezuelans, promoting the independence of foreign systems for national banking operations in the consolidation of the effective use of the bolivar”.Read more: