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Chaos in Venezuela as Nicolas Maduro flip-flops on currency withdrawal

The president's plan has tested the patience of many Venezuelans, sparking looting and unrest

  • Date: 2016/12/19
  • Time: 11:40
  • News Code: 34094
  • View: 273
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Chaos in Venezuela as Nicolas Maduro flip-flops on currency withdrawal

Maduro decreed on 11 December that the 100 bolivar bill would be pulled from circulation in 72 hours.

VON PRESS Americas: The 100 bolivar bill was nearly worthless already when Venezuela’s President Nicolás Maduro attempted to make it completely useless.

The bill fetched just 2 cents on the black market, 14 cents at the official rate. But it was the highest denomination bank note in circulation in the country, where one bill was just enough to buy a pack of five pieces of gum.

The move was designed to combat contraband “mafias” on Venezuela’s borders that were deemed to be part of an international conspiracy against its oil-dependent economy. Six new higher denomination bills would be rolled out and the frontier with neighboring Colombia would be closed.

Stunned Venezuelans, who are already used to standing in long queues for basic foods and medicines, lined up at banks across the nation to deposit their cash.

José Martín, a shop-owner in the western city of Maracaibo, had a huge cache of 100 bolivar bills for his business.

“The guy who brings me flour charges me in cash... so now I don’t know what I’ll do with all these bills. I will try to deposit them but it’s a lot of time standing in line,” he said. After millions of Venezuelans scrambled to turn in their soon-to-be-worthless cash, they were meant to be able to withdraw newly printed notes of higher denomination ranging from 500 to 20,000 bolivars.

Except the new bills never arrived. The following day, Maduro abruptly announced a stay of execution for the100 bolivar bills, blaming the same international conspiracy for delaying the planeloads of cash that were bringing the new notes. He declared the old bills would be good until 2 January calling the decision a “necessary tactical change in tack”. The borders with Colombia would remain closed until then to prevent the entry into Venezuela of what the government says are huge caches of bills being hoarded.

Despite the setback and the arrest more than 300 people during protests and lootings on Sunday alone, Maduro declared victory. “Mission complete,” he said on his weekly television program, adding that banks had gone from holding just 2% of the estimated 6bn 100-bolivar bills in circulation to 80%.

The black market bolivar dropped significantly from over 4,000 bolivars to the dollar to 2,500 at the weekend. But Raul Gallegos, an analyst with Control Risks, a consultancy, says the drop was likely temporary. “It will likely be back up within weeks,” he said. Maduro’s latest economic experiment and the apparent improvisation tested the patience of many Venezuelans. Looting continued on Sunday, with more than 100 people reportedly arrested in eastern Ciudad Bolivar for sacking a drug store, and tensions were high in western Tachira state on the border with Colombia where many Venezuelans rely on buying goods in the neighboring nation to get by.

Yorman Aguire, 38, a security guard, waited five hours to deposit his wads of cash that amounted to a few hundred dollars at the black market rate. “With this change in bills, the lack of money on the street and how expensive things are, we won’t be doing much for Christmas,” he said. Inflation is estimated to run into four digits and some experts say it could reach 2000% this year amid a chronic shortage of basic foods, goods and medicines. Inflation in Venezuela, which relies on imports for nearly all it consumes, is intricately tied with the exchange rate, which Maduro says has been manipulated to undermine his socialist government.

However economists argue that price controls and rampant government spending – including four wage hikes in a year for public sector workers – is what has the economy on its knees.

And adding insult to injury, Venezuela’s minister for prisons, Maria Iris Varela, mocked those who’d given up on the 100 bolivar bills they hadn’t been able to deposit, and used them to light cigarettes or pasted them to lampposts in a sign of protest, before Maduro announced the delay. “Ha ha ha ha I’d like to see the faces of those who threw their 100 (bolivar) bills out the window and burned (them)!”

 


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