Ordinary Venezuelans’ hardships are far from over after the government dropped 5 zeros from the bolívar, issuing a “lighter” version of the currency on Monday August 20th, named the sovereign bolívar. In a desperate measure to curb inflation and help keep the economy afloat, President Maduro issued a new series of banknotes that are pegged to his obscure cryptocurrency, the Petro.
Launched in February, the Petro is the world’s first pre-mined national cryptocurrency and was designed in a scheme to attract foreign currency and bypass U.S. sanctions. The Petro is backed by the Latin American country’s oil resources, each Petro being fixed at the price of the cost of a barrel: $60. One Petro has been fixed at 60 new bolívars.
The problem, however, is that dropping the zeros only hides the problems of a crippled economy where prices “are doubling every four weeks” and where inflation “is running at over 80,000 per cent”. Meanwhile, the Petro is nowhere to be found on official cryptocurrency trading platforms. Another cause of concern is that the government can issue new Petros at will, affecting investor confidence.
Dropping the zeros has devalued Venezuela’s currency by 95%. Furthermore, people fear that entire country might implode after Maduro announced a 3,000 percent increase of the minimum wage, bringing it from under a dollar to about $30 – something most businesses will be unable to afford.
Speaking for the Financial Times [paywall], Russ Dallen of Caracas Capital said “He [Mr Maduro] might as well have chosen pegging it [the sovereign bolívar] to unicorns”.