Chaos and confusion erupted across Venezuela, and most stores were shuttered on Saturday, after president Nicolas Maduro announced that the government would enact a massive currency devaluation, implement a new minimum wage, hike taxes, and also raise gasoline prices for most citizens even as the country struggles with the greatest hyperinflation on record, surpassing even that of the Weimar Republic.
As a result of the enacted actions, the new version of the bolivar will be pegged to the value of the state cryptocurrency, the etro, which according to Bloomberg amounts to a 95% devaluation of the official rate, and will trade in line with where the black market was; the government will also raise the minimum wage more than 3,000 percent,which works out to about $30 a month.
Maduro said the new currency, set to enter circulation on Monday, will be called the “sovereign bolivar” and will be based on the petro, which is valued at $60 or 3,600 sovereign bolivars, after the redenomination planned for August 20 slashes five zeroes off the national currency. The minimum wage will be set at half that, 1,800 sovereign bolivars.The government would cover the minimum wage increase at small and medium-size companies for 90 days, Maduro added. It was not clear what happens after.
“They’ve dollarized our prices. I am petrolizing salaries and petrolizing prices,” Maduro explained in a Friday televised address. “We are going to convert the petro into the reference that pegs the entire economy’s movements.”
In other words, for the first time ever, an oil-linked cryptocurrency effectively replaces the sovereign currency. As a result the petro, which will fluctuate dramatically, will be used to set prices for goods. The package of measures combine the necessary with the baffling, Luis Vicente Leon, president of the Caracas-based pollster Datanalisis, said in a Twitter post on Friday.
“The government has recognized the need to anchor the economy to an external variable outside of its control, such as the international price of oil. A wise decision, but it does so by hiding it in a vehicle that suffers from lack of confidence and viability, such as the Petro,” Leon said.
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