Venezuela’s lunatic experiment in demonetisation
Posted by hkarner - 17. Dezember 2016
Source: The Economist
Nicolás Maduro’s latest act of economic sabotage: cancelling the 100-bolívar note
ANYTHING India does, Venezuela can do worse. Last month, in a dramatic effort to curb corruption, India’s government cancelled all its high-denomination banknotes without warning. Since 98% of transactions in India are done in cash, commerce seized up. It is a huge mess, but India will after a while print enough replacement notes. And it has a plausible plan to help its many poor people join the cashless digital economy.
Not so Venezuela. President Nicolás Maduro says that the constant shortages of more or less everything in Venezuela are caused by evil speculators. (They are actually caused by his price controls.) Mr Maduro claims that “mafias” in Colombia are stockpiling lorryloads of bolívars, the Venezuelan currency, and sneaking across the border to buy up price-controlled goods. Given Venezuela’s soaring inflation, this seems improbable. “The idea that anybody would want to hoard a currency that has lost 60% of its value in the past two months is absurd,” says David Smilde of the Washington Office on Latin America, a think-tank.Nonetheless, on December 11th Mr Maduro announced that the 100-bolívar note would cease to be legal tender within 72 hours. It is the most valuable note in circulation, accounting for 77% of the nation’s cash. (On the black market, it is worth three American cents.) The government says people can deposit the old notes in banks and they will be replaced with new ones in denominations as high as 20,000 bolívars. Eventually.
Massive queues—of ordinary people who use cash to survive—quickly formed outside banks. They brought boxes of old banknotes and waited hours to deposit them. Venezuela is one of the most crime-ridden countries on Earth but few muggers bothered to rob people of their soon-to-be-worthless cash. Tempers frayed, however, and fights broke out. “It’s an abuse,” says one disgruntled queuer after standing two hours in a line at a Caracas shopping mall to pay in the equivalent of less than $20. “The government deliberately wastes our time,” grumbles Bianca Manrique, a doctor.
This month Mr Maduro’s regime also seized millions of toys from a toymaker that, it said, was charging too much. The government will distribute them to children and try to take the credit. Mr Maduro may see himself as Saint Nick, but few Venezuelans are convinced.