Based on findings from the International Monetary Fund (IMF), the annual inflation rate for Venezuela could reach as high as 1.37 million percent by the end of 2018. Inflation estimates for the country have risen several times this year as Venezuela struggles with policies and production — and prepares to launch its Petro cryptocurrency
Venezuela has made headlines many times throughout 2018 in its current struggle with inflation. CNN reports the cause of such inflation as the result of “years of excessive government spending on welfare programs, poorly managed facilities and dilapidated farms.”
This marks the third time the IMF has increased its inflation estimates this year, with estimates from January of 13,000 percent, and from July at 1,000,000 percent. Gross Domestic Product (GDP) is also expected to decrease by 18 percent for 2018. This is bad news for a country that has such a promising amount of oil reserves.
Adding to the inflation problem is the dramatic increase of minimum wage, brought on by Nicolas Maduro, Venezuela’s president. Maduro has raised minimum wage an astounding 24 times since 2013, leading in part to many business closings.
Led by Maduro, Venezuela’s government has sought a cure for its economic woes in the “Petro,” a state-issued cryptocurrency allegedly backed by barrels of oil.
In further efforts to combat the problem of inflation, Maduro has said that the government will create a fiat currency that’s pegged to the Petro, which is itself pegged to oil — as confusing as that sounds. This double-pegged fiat currency is called the Bolivar Soberano — or, in English, the Sovereign Bolivar.
“I ask for your confidence, I ask for your support, beyond ideologies and political positions, because Venezuela needs this change, the mafias are over!… We have the correct vision of what the economic future in Venezuela should be, above all, we will achieve it.”
Logically, it would be difficult to trust these statements based on previous track record.
Amidst skepticism, Maduro continues to be adamant about the idea of the Petro. He announced in late August that, “Venezuela will have a second accounting unit based on the price, the value of the Petro. It will be a second accounting unit of the Republic and will begin operations as a mandatory accounting unit of our PDVSA oil industry.”
Several doubts have also come to light that the Petro (and its oil backing) may not even exist at all. Additionally, no shops or stores were reportedly using the Petro, and the only buyers that could be found were anonymous online persons.
Based on recent reports, it appears that Petro adoption has been low, though this may change following the public sale in November. Meanwhile, Citizens continue to leave the country in droves.
Most recently, on Oct. 8, it was announced that Venezuelan “salary bonuses would be paid in Petros,” with Maduro explaining that he wants money made by salaried workers to have more impact.
Hopefully, the public will see a brighter future for Venezuela in the days ahead.
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Last modified: March 4, 2021 3:48 PM