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Venezuela 'paralysed' by launch of sovereign bolivar currency

Tuesday - 21/08/2018 16:50
Venezuela came to a standstill on Tuesday as the country tried to deal with its newly introduced currency.
REUTERS / The new sovereign bolivar was introduced in a bid to tackle hyperinflation
REUTERS / The new sovereign bolivar was introduced in a bid to tackle hyperinflation

Thousands of businesses closed in order to adapt to the "sovereign bolivar", and many workers stayed at home.

President Nicolás Maduro launched the new banknotes on Monday, revaluing and renaming the old bolivar currency.

The government say this will tackle runaway inflation, but critics say it could make the crisis worse. The notes went into circulation on Tuesday.

President Maduro had declared Monday to be a bank holiday.


Analysis: Confusion reigns in the oil-rich nation

By Will Grant, BBC Latin America correspondent

Much of Caracas is eerily empty for a working day. Some in the opposition called for a strike but many people are simply staying at home out of uncertainty, too concerned about what the new currency will mean for the embattled nation to venture out.

The result is that Venezuela is, in essence, a paralysed country. Confusion reigns in the oil-rich nation and, historically, such moments in Venezuela can be extremely volatile.

As yet, there are no reports of significant protests or violence, but there is an increased deployment of the security forces across the country for the roll out of the new bolivar.

President Nicolas Maduro has said the measure will be the saviour of the economy and tackle the spiralling hyper-inflation. Ordinary people however, simply don't believe him and are concerned for the future, putting even greater pressure on neighbouring countries struggling to deal with the exodus of millions of Venezuelans.


The new currency lops five zeroes off the old "strong bolivar" - meaning a cup of coffee worth 2.5m strong bolivars in the capital Caracas last month now costs 25 sovereign bolivars.

However, people in Caracas told the BBC they were restricted to withdrawing only 10 sovereign bolivars on Tuesday from cash machines.

A sign on a business in Caracas reads 'Closed for reconversion' in Spanish
REUTERS
A sign on a business in Caracas reads "Closed for reconversion" in Spanish

The country's black market in dollars is even frozen by the currency shift, as confusion reigns.

The government announced several other key economic changes to accompany the new notes, including raising the minimum wage by 34 times its previous level from 1 September, raising VAT and cutting generous fuel subsidies.

President Maduro also said the sovereign bolivar would be tied to the petro, a virtual currency the government says is linked to Venezuela's oil reserves.

But the US has banned its citizens from trading in it, and one cryptocurrency site, ICOindex.com, has even labelled the petro "a scam".

"Anchoring the bolivar to the petro is anchoring it to nothing," economist Luis Vicente León told AFP news agency.

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