Frustration rules as Venezuela unveils new form of currency
CARACAS, Venezuela — Saul Jimenez just wanted to buy bread from his neighborhood bakery in Venezuela’s capital on Monday. It didnot go well.
Banks and most other businesses were closed for the day as Venezuela launched a series of dramatic economic reforms, beginning with the release of a currency with five fewer
zeros in a bid to tame soaring inflation. Venezuelan President Nicolas Maduro carried out one of the greatest currency devaluations in history over the weekend — a 95 percent plunge.
Rampant inflation means it would take a fistful of bills to pay for a loaf of bread, so many Venezuelans like Mr. Jimenez rely on bank cards.
But with banks closed to reset their systems for the change, Mr. Jimenez’s cards wouldn’t work — a scene that played out across Caracas.
“It wasn’t just mine. Others’ didn’t work, either,” said the attorney, who left the bakery empty-handed and frustrated. “Neither the debit card nor the credit card.”
The currency conversion is among the less controversial parts of Mr. Maduro’s economic plan. He’ll next hike the minimum wage by more than 3,000 percent and raise gasoline prices — now less than a penny to fill up — to international levels.
Critics say the package of measures will only make the economic crisis worse.
Opposition leaders are seizing on tension among residents, calling for a nationwide strike and protest Tuesday. They hope to draw masses into the streets against Mr. Maduro’s socialist ruling party — something they’ve failed to do in over a year.
The closed banks spent Monday preparing to release the new currency: the “sovereign bolivar.” Mr. Maduro’s government says it will raise gasoline prices in late September to curtail rampant smuggling across borders. The dramatically higher minimum wage will go into effect starting Sept. 1.
Economists say the package of measures is likely to accelerate hyperinflation rather than address its core economic troubles, like oil production plunging to levels last seen in 1947.
And if inflation gets fresh fuel from the measures, a massive exodus of Venezuelans fleeing the crisis to neighboring countries will likely increase and with it, tensions and restrictions like the ones seen over the past few days.
On Sunday, the Ecuadoran border was closed to Venezuelans without passports and crowded with hundreds of other migrants who had found their trips suddenly blocked. Elsewhere, the Brazilian government plans to send police to the border town of Pacaraima after residents there attacked Venezuelan migrants.
As Mr. Maduro declared Monday a national holiday, Caracas was quiet with most stores closed for business.
Other banking activities shut down for about 12 hours to allow for a transition to the new currency. Most banks on Monday reactivated their online services and ATMs, but some customers complained of troubles.
The impact of the currency conversion won’t be known until Tuesday. One question is whether the banks hold enough cash to meet the public’s need, as officials have promised.
While Mr. Maduro boasted in Friday night’s announcement that the International Monetary Fund wasn’t involved in the policies, aspects of the moves bore a resemblance to a classic orthodox economic adjustment, albeit with some confusing twists.
Venezuela was once among Latin America’s most prosperous nations, holding the world’s largest proven oil reserves, but a recent fall in oil prices accompanied by corruption and mismanagement under two decades of socialist rule have left the economy in a historic economic and political crisis.
Inflation this year could top 1 million percent, the International Monetary Fund says.
Inflation has made it difficult to find paper money. The largest bill under the outgoing cash system was the 100,000bolivar note, equal to less than 3 cents on the commonly used black market exchange rate. A cup of coffee costs more than2 million bolivars.