Venezuela on edge as leader unveils reforms
Radical overhaul will ‘only make it worse’
CARACAS: Uncertainty reigned in Venezuela on Saturday after President Nicolas Maduro unveiled a major economic reform plan aimed at halting the spiraling hyperinflation that has thrown the oil-rich, cashpoor South American country into chaos.
Ahead of a major currency overhaul today, Caracas will start issuing new banknotes after slashing five zeroes off the crippled bolivar, Mr Maduro detailed other measures he hopes will pull Venezuela out of crisis.
Those measures — revealed in a speech to the nation late on Friday — include a massive minimum wage hike, the fifth so far this year.
But analysts say the radical overhaul could only serve to make matters worse.
“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.”
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. The embattled Mr Maduro, a former bus driver and union leader, said the country needed to show “fiscal discipline” and stop the excessive money printing that has been regular in recent years.
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 US$60 (1,990 baht), based on the price of a barrel of Venezuela’s oil. In the new currency, that will be 3,600 sovereign bolivars — signalling a massive devaluation.
In turn, the minimum wage will be fixed at half a petro (1,800 sovereign bolivars), starting today. That is about $28 — more than 34 times the previous level of less than a dollar at the prevailing black market rate.
Mr Maduro also said the country would have one fluctuating official exchange rate, also anchored to the petro, without saying what the starting level would be.
As it stands, the monthly minimum wage — devastated by inflation and the aggressive devaluation of the bolivar — is still not enough to buy a kilogramme of meat.
In the capital Caracas, residents were sceptical 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, said.
Angel Arias, a 67-year-old retiree, dubbed the new currency a “pure lie!”
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 crippled by paralysed public services.
Mr Maduro blames the country’s financial woes on opposition “plots” and American sanctions — but admits that the government will “learn as we go along” when it comes to the currency redenomination.
His government pushed back on Saturday against criticism of the economic reform plan.
“Don’t pay attention to naysayers,” Information Minister Jorge Rodriguez said. “With oil income, with taxes and income from gasoline price hikes ... we’ll be able to fund our programme.”