Sunday, December 17, 2017

Venezuela to issue larger bill as currency keeps melting

By on December 4, 2016

By Joshua Goodman

BOGOTA, Colombia — Venezuela said it will issue higher-denominated bills as triple-digit inflation and a currency meltdown leave the country’s largest note worth just around 2 U.S. cents on the black market.

The central bank said in a statement Saturday that six new bills ranging from 500 to 20,000 Bolivars will begin circulating on Dec. 15. Currently the largest-denominated bill is 100 bolivars, while a 2-liter soft drink bottle can cost 25 times that amount.

n this Oct. 24, 2007 file photo, a woman looks at oversized versions of the new Venezuelan currency, coined the 'Strong Bolivar' in Caracas, Venezuela. Thousands of companies suffer under currency controls that all but deny them the U.S. dollars they need to import vital items into this oil-rich country, from food to cars to spare parts, even gasoline. Venezuelan firms must sell their wares at state-controlled prices that don't reflect the 22 percent inflation rate, the highest in Latin America. (Howard Yanes, File/AP)

In this Oct. 24, 2007 file photo, a woman looks at oversized versions of the new Venezuelan currency, coined the ‘Strong Bolivar’ in Caracas, Venezuela. (Howard Yanes, File/AP)

The issuing of new bills comes as Venezuela is bordering on economic collapse. The currency lost 67 percent of its value on the black market last month, falling to 4,587 bolivars per U.S. dollar — the steepest monthly plunge ever, according to data by Dolar Today, which tracks the black market rate by monitoring transactions with the currency at foreign exchange houses across the border in Colombia.

Inflation meanwhile is soaring and expected to surpass four digits next year, according to the International Monetary Fund. Venezuela’s government hasn’t published price data since 2015.

Adding to the currency woes, cash has become impossible to find with ATM withdrawals capped at an extremely low amount and on Friday the nation’s credit card payment system unexpectedly froze up for several hours.

President Nicolas Maduro blamed the malfunction on a “cyberattack” and ordered the Sebin intelligence service to raid the offices of CrediCard, which processes payment for Visa and MasterCard. He’s also accused “mafias” in neighboring Colombia of trying to carry out an “economic coup” against his socialist-run economy.

“The right wing wants to impose on Venezuela a parallel exchange rate from an account in Miami, and from that account take the dollar to a disastrously crazy level,” Maduro said in a televised address announcing the rollout of the new bills.

The currency meltdown comes amid what should’ve been a rare bout of good economic news for Venezuela after OPEC last week ceded to months of pressure from Maduro and other oil-dependent nations and decided to cut production levels for the first time since 2008. Crude prices rallied the most in five years as a result.

Venezuela has maintained strict currency controls since 2003 and currently has two legal exchange rates of 10 and 663 bolivars per dollar used for priority imports. On the black market, where people and businesses turn when they can’t obtain government approval to purchase dollars at the legal rates, the bolivar has collapsed by a factor of five over the past year.

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