Earlier in August, Venezuela began to implement dramatic reforms dictated by their President, Nicolas Maduro, to help their struggling economy, which experts like leonardogonzalezdellan have been waiting for. These new reforms include a new currency for the country, and a minimum wage hike of at least 3,000%.
These new changes start with the introduction of a new Venezuelan currency, one that removes five zeroes off of the country’s current currency, the bolivar, which is quickly depreciating. Maduro has also said that he’ll be raising the country’s gas prices to match international levels, which critics say, combined with the former, will only worsen the country’s situation.
Banks across the country closed down for several days as they prepared to roll out the new currency, dubbed the sovereign bolivar, which was printed with five fewer zeroes in an attempt to cut down on inflation. Maduro’s government has stated that, come late September, the country’s gas prices, currently the cheapest in the world, will have its prices raised to international levels in order to curtail rampant smuggling across the country’s borders.
Economists like leonardogonzalezdellan are saying that these methods would not help curtail the hyperinflation in Venezuela, it would instead do the opposite; only accelerate it and exacerbate the issue, like oil production in the country which has dropped to levels not seen since 1947.
John Hopkins University Economist Steve Hanke, says that the bolivar redenomination will just be going under one of Caracas’ popular plastic surgeons, changing in appearance, but nothing is really changing; it’s ultimately just a face-lift.
Notably, the Venezuelan government has made a similar move back in 2008, when then-President Hugo Chavez introduced a new currency that lopped off three zeros from their currency to fight back against inflation.
Maduro also announced that the government would be raising minimum wages by at least 3,000%, bringing it up to about $30, at the widely used black market rate. Additionally, Maduro plans to peg wages, prices and pensions to the new petro, a cryptocurrency they recently announced which has yet to start its circulation. According to Maduro, the petro would be equal to $60 each, with the goal of having a single floating exchange rate in Venezuela tied to the petro.