Cash chaos as Venezuela stuck in cur­rency limbo

Bor­ders shut to fight ‘mafias’ hoard­ing old notes

Kuwait Times - - BUSINESS -

CARACAS:

Venezue­lans lined up Thurs­day to de­posit 100-unit ban­knotes be­fore they turned worth­less, but re­place­ment bills had yet to ar­rive, in­creas­ing the cash chaos in the coun­try with the world’s high­est in­fla­tion. Some frus­trated cus­tomers re­ceived ex­pir­ing 100-bo­li­var notes when they with­drew money at ATMs, then im­me­di­ately had to line up again to re-de­posit them.

Venezue­lans are stuck in cur­rency limbo af­ter Pres­i­dent Ni­co­las Maduro or­dered the 100-bo­li­var note-the largest de­nom­i­na­tion, cur­rently worth about three US cents-re­moved from cir­cu­la­tion in 72 hours. The gov­ern­ment an­nounced late Thurs­day that Venezuela’s bor­ders with Colom­bia and Brazil-closed to fight “mafias” al­legedly hoard­ing the notes-will stay shut three more days.

‘I don’t get the joke’

The Thurs­day dead­line was sup­posed to co­in­cide with the launch of a 500bo­li­var bill, the first in a new se­ries of ban­knotes that will even­tu­ally be is­sued in de­nom­i­na­tions of up to 20,000 bo­li­vars. But with the new bills yet to ar­rive in the cap­i­tal Caracas by mid­day, Venezue­lans were left fac­ing eco­nomic chaos. “I don’t get the joke,” of­fice worker Yarelis Car­rero said. “When you with­draw cash at the ATMs, they give you 100-bo­li­var bills. And you can’t get the new ones in­side the bank, ei­ther.”

She woke up early to get rid of her ex­pir­ing ban­knotes only to dis­cover that the bills meant to re­place them were nowhere to be found. From Fri­day, Venezue­lans will be able to ex­change 100-bo­li­var bills only at one of the cen­tral bank’s two head­quar­ters build­ings. Maduro, who has presided over an un­rav­el­ing of Venezuela’s oil-rich econ­omy, said the 100-bo­li­var note had to be killed be­cause “mafias” were hoard­ing it abroad in what he called a US-backed plot to desta­bi­lize Venezuela.

In re­sponse, he sealed the bor­ders with Colom­bia and Brazil, where he says much of the hoard­ing is hap­pen­ing. Now those fron­tiers will stay shut un­til Sun­day. That led to pan­de­mo­nium on the bor­der, as for­eign­ers rushed home and Venezue­lans found them­selves cut off from pre­cious sup­plies of food, medicine and ba­sic goods that are in des­per­ately short sup­ply in Venezuela.

Go­ing cash­less

Cen­tral bank chief Nel­son Mer­entes promised last week that “mil­lions and mil­lions” of new bank notes were on their way. The new bills-which are be­ing printed abroad-were orig­i­nally meant to cir­cu­late along­side the old ones dur­ing a tran­si­tion pe­riod. But Maduro axed that plan when he is­sued his de­cree against the 100-bo­li­var note Sun­day.

It ac­counted for 77 per­cent of the cash in cir­cu­la­tion in Venezuela, ac­cord­ing to of­fi­cial fig­ures. Venezue­lans had grown used to car­ry­ing around huge stacks of them for even the small­est pur­chases. Now they are stuck with even big­ger piles of 10-, 20- and 50-bo­li­var notes just as the Christ­mas shop­ping sea­son is at its height.

Some com­pa­nies have stopped deal­ing in cash al­to­gether. One of the main Caracas taxi com­pa­nies now re­quires clients to pay for their rides in ad­vance by elec­tronic bank trans­fer. Stand­ing in line at the bank, cus­tomers com­plained there was no sign of the new ban­knotes ar­riv­ing. “No­body’s seen them yet,” Saul Ber­nal said. “A guy I know who works for an ar­mored truck com­pany said even they haven’t seen them. Pure lies!”

Pum­meled by low oil prices, Venezuela is mired in eco­nomic cri­sis and crip­pled with the world’s high­est in­fla­tion rate-set to hit 475 per­cent this year, ac­cord­ing to an IMF fore­cast. Maduro’s pop­u­lar­ity has plunged amid the tur­moil, but the frac­tured op­po­si­tion has so far failed to force the left­ist leader to re­lin­quish his grip on power.

CARACAS: Peo­ple queue out­side a bank in Caracas in an at­tempt to de­posit money. -—AFP

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