Venezuela's Maduro Decrees Official Exchange Rate Between Bolívar and Petro

Venezuela’s Maduro Decrees Official Exchange Rate Between Bolívar and Petro

Venezuelan President Nicolás Maduro’s administration has pivoted again toward hyperinflation, announcing Friday, August 17th, that one petro would equal 360 million bolívars. A caked-in devaluation means bolívar inflation could rocket nearly 100 percent, which would further intensify the already-dire existential and economic straits of the Venezuelan people. 

Also read: What Caused the Crypto Sell-off? Analysts Look to the Usual Suspects

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‘Trust Me,’ Says Maduro

President Nicolas Maduro declared on Friday his official exchange rate between his administration’s recently launched, and much maligned, petro cryptocurrency and the nation’s hyperinflated bolívar fiat currency.

As such, the Venezuelan President declared in a televised address that 360 million bolívars would now fetch one petro, with the crypto itself being equal to $60 USD, going forward. That valuation hails a “new exchange rate of 6 million bolivars per dollar, broadly on par with widely used black market exchange rates, entailing a 96 percent devaluation compared with the current official DICOM rate of 248,832 bolivars per dollar,” per Reuters.

In a nation already racked with hyperinflation, the shift will tragically weaken the buying power of the Venezuelan people even further — a dynamic that will undoubtedly lead to even more dire conditions in a country where starvation is becoming the rule, not the exception.

The move comes after President Maduro had declared days earlier his intention to “petrolize” Venezuela by way of pegging minimum wage, pensions, and more to the bureaucratically-shrouded petro. It also comes as he tinkered with the nation’s fiat itself, revaluing the bolívar fuerte to the bolívar soberano back in March 2018.

Crushing hyperinflation is making survival a struggle for many Venezuelans.

Maduro cast the financial shift as part of a wider struggle against the United States and the dollar, with U.S. President Donald Trump having sanctioned the petro earlier this year. In his announcement of the new rates, Maduro was typically defiant:

“They’ve dollarized our prices. I am petrolizing salaries and petrolizing prices. We are going to convert the petro into the reference that pegs the entire economy’s movements.”

A Strongman Is a Strongman Is a Strongman

Venezuela’s Maduro and Turkish President Tayyip Erdogan have recently served as potent reminders that rogue administrations have a way of steering monetary policy into the ground to the detriment of national economies.

It’s an inherent risk of statehood — the state being commandeered for the temporary and personal whims of those who have no place being in power.

The irony is that bitcoin was created to provide a way to engage in the commerce of value and ideas beyond the interpellation of the state. In President Maduro’s case, however, his petro cryptocurrency will seemingly be Exhibit A in how cryptoassets can be misused and abused by the powerful in the years ahead.

What’s your take? Is pegging the bolivar to the petro a bad idea? Let us know what you think in the comments below. 

Images via Pixabay, The Independent

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