Development: On 25 July Venezuela’s President Nicolás Maduro announced on national television and radio a series of economic measures intended to boost the country’s struggling economy. Included in the proposals is a two-week delay to the redenomination of the Bolívar Fuerte (BF), which will now take place on 20 August.
Significance: This is the second delay in the rollout of the new currency, which was supposed to enter circulation in June. It will be known as the Bolívar Soberano and will replace the BF which has been in circulation since 2008. When the new currency was originally proposed, it was announced that three zeros would be taken off the BF to help reduce price inflation, but President Maduro has now announced that five zeros will be removed in the Bolívar Soberano, meaning that one new Bolívar will be worth BF100,000. The Maduro government hopes that this will help to reduce the rampant inflation, which the International Monetary Fund (IMF) predicts will reach 1,000,000% by the end of the year.
- The Bolívar Soberano is to be backed by the Petro, the state-sponsored cryptocurrency launched by the Maduro government in February 2018 and backed by Venezuelan oil. President Maduro has described this currency re-engineering as an “economic revolution” that will allow Venezuela to overcome the impact of the economic sanctions imposed by the US and the European Union (EU) on his government, which prevent it from having access to international financial markets.
- Linking Venezuela’s currency to its raw material output was an idea first proposed by the late former president Hugo Chávez (1999-2013). Maduro has also asserted that tying the Bolívar Soberano to the Petro will help to avoid the same issue of loss of value and hyperinflation that has plagued the BF.
- In the same announcement, President Maduro informed the country that he had signed a decree assigning the ‘Ayacucho II’ oil bloc, located in the Orinoco oil belt, to Venezuela’s central bank (BCV). Ayacucho II is said to contain 29.3m barrels of certified crude oil, and the transfer is intended to bolster the BCV’s international reserves by giving it control of the sale of its oil output.
- In his address, the president blamed the economic situation in Venezuela on the global collapse of international oil prices and what he called the ‘economic war’ being waged against his government by the US and its allies.
- Maduro has repeatedly asserted an ambition to diversify Venezuela’s economy and to move away from its reliance on oil, and yet the introduction of the Petro and plans to tie it to the Bolívar Soberano demonstrate how Venezuela is yet to find any other options to underpin its economy.
Looking Ahead: Although President Maduro and his ministers declared that they were optimistic that these latest economic measures will produce results, and assured the country that this would be the final delay in the rollout of the new currency, many see the announcement as simply another effort to placate citizens with promises of future change.
