Drastic new measures for stricken Venezuelan economy | Business | Economy and finance news from a German perspective | DW | 20.08.2018

Visit the new DW website

Take a look at the beta version of dw.com. We're not done yet! Your opinion can help us make it better.

Go to the new dw.com

We use cookies to improve our service for you. You can find more information in our data protection declaration.

More info OK
  1. Inhalt
  2. Navigation
  3. Weitere Inhalte
  4. Metanavigation
  5. Suche
  6. Choose from 30 Languages
Advertisement

Business

Drastic new measures for stricken Venezuelan economy

The Venezuelan economy is in freefall, crippled by a currency crisis that has seen inflation soar to farcical levels. The country’s populist government introduces measures on Monday aimed at halting the collapse.

  • A 2.4 kg chicken is pictured next to 14,600,000 bolivars

    Venezuela: What can a bolivar buy?

    Millions for chicken

    You will need to shell out a whopping 14.6 million bolivars ($2.2, €1.9) for a 2.4 kilogram chicken in Caracas.

  • A kilogram of tomatoes is pictured next to 5,000,000 bolivars

    Venezuela: What can a bolivar buy?

    Expensive deal

    A kilogram of tomato will set you back by 5 million bolivars.

  • A toilet paper roll is pictured next to 2,600,000 bolivars

    Venezuela: What can a bolivar buy?

    Serious crisis

    Be ready to pay 2.6 million bolivars for a toilet paper roll in the Venezuelan capital, Caracas. Yes, you read it right.

  • A package of pads is pictured next to 3,500,000 bolivars

    Venezuela: What can a bolivar buy?

    Worthless currency?

    Three-and-a-half millions — that's how much you will have to pay for a packet of sanitary pads in Caracas.

  • A package of 1kg of rice is pictured next to 2,500,000 bolivars

    Venezuela: What can a bolivar buy?

    Which is heavier?

    One kilogram rice? Well, that will cost you 2.5 million bolivars.

  • A package of diapers is pictured next to 8,000,000 bolivars

    Venezuela: What can a bolivar buy?

    Is it worth?

    A packet of diapers for your baby can you set you back by a staggering 8 million bolivars.

  • A kilogram of cheese is pictured next to 7,500,000 bolivars

    Venezuela: What can a bolivar buy?

    Forget saying 'cheese'

    You will have to cough up 7,500,000 bolivars for a kilogram of cheese. But hold on, that may change with the Venezuelan government set to issue new paper money with five fewer zeros. So, just 75 bolivars for a kilogram of cheese.


  • A 2.4 kg chicken is pictured next to 14,600,000 bolivars

    Venezuela: What can a bolivar buy?

    Millions for chicken

    You will need to shell out a whopping 14.6 million bolivars ($2.2, €1.9) for a 2.4 kilogram chicken in Caracas.

  • A kilogram of tomatoes is pictured next to 5,000,000 bolivars

    Venezuela: What can a bolivar buy?

    Expensive deal

    A kilogram of tomato will set you back by 5 million bolivars.

  • A toilet paper roll is pictured next to 2,600,000 bolivars

    Venezuela: What can a bolivar buy?

    Serious crisis

    Be ready to pay 2.6 million bolivars for a toilet paper roll in the Venezuelan capital, Caracas. Yes, you read it right.

  • A package of pads is pictured next to 3,500,000 bolivars

    Venezuela: What can a bolivar buy?

    Worthless currency?

    Three-and-a-half millions — that's how much you will have to pay for a packet of sanitary pads in Caracas.

  • A package of 1kg of rice is pictured next to 2,500,000 bolivars

    Venezuela: What can a bolivar buy?

    Which is heavier?

    One kilogram rice? Well, that will cost you 2.5 million bolivars.

  • A package of diapers is pictured next to 8,000,000 bolivars

    Venezuela: What can a bolivar buy?

    Is it worth?

    A packet of diapers for your baby can you set you back by a staggering 8 million bolivars.

  • A kilogram of cheese is pictured next to 7,500,000 bolivars

    Venezuela: What can a bolivar buy?

    Forget saying 'cheese'

    You will have to cough up 7,500,000 bolivars for a kilogram of cheese. But hold on, that may change with the Venezuelan government set to issue new paper money with five fewer zeros. So, just 75 bolivars for a kilogram of cheese.


A raft of new measures comes into effect in Venezuela on Monday, in the latest attempt to deal with the country's growing economic crisis.

President Nicolas Maduro announced on Friday that a major currency overhaul would take place on Monday, with Caracas set to issue new banknotes after chopping five zeroes off the beleaguered bolivar, which has been subject to spiraling hyperinflation.

The other measures announced by Maduro (pictured above), a former union leader who came to power five years ago following the death of Hugo Chavez, include a massive hike of the country's minimum wage as well as new official exchange rate arrangements.

Read more: Inflation-wracked Venezuela forced to end cheap oil and gas

The reform plans are the latest attempt to halt the oil-rich country's ongoing economic collapse, caused by years of populist policies which have ultimately destabilized the country's economy.

A chaotic scenario

Analysts were initially skeptical about the possible benefits of the latest measures.

 "There will be a lot of confusion in the next few days, for consumers and the private sector," Asdrubal Oliveros, director of the Ecoanalitica consultancy, told AFP. "It's a chaotic scenario."

What has brought Venezuela to the brink of collapse?

In Friday's speech to the nation, Maduro said the country needed to show "fiscal discipline" following years of excessive money printing.

The new currency, which comes into use on Monday, is known as the sovereign bolivar (to distinguish from the current currency, the so-called 'strong' bolivar) and it will be anchored to the country's widely discredited cryptocurrency, the petro.

In the new arrangements, one petro will be worth $60 (€53), based on the price of the country's oil. That will be equal to 3,600 sovereign bolivars.

Read more: How Venezuela gets plundered

As for the minimum wage hike, which also comes into place on Monday, the new monthly rate will be fixed at 1,800 sovereign bolivars. That works out at more than 34 times the previous rate, based on the black market valuation of a US dollar in the country.

Due to devastating inflation and the persistent devaluation of the bolivar, the existing monthly minimum wage rate is barely enough to buy a kilo of meat in the capital city.

Optimism and money in short supply

The International Monetary Fund (IMF) predicts that inflation in Venezuela will hit a staggering one million percent this year. That continues what has already been four years of economic misery for the country.

Hyperinflation has crippled the Venezuelan economy

Hyperinflation has crippled the Venezuelan economy

Maduro has consistently blamed others for the economic difficulties and over the weekend, his government defended its role in the ongoing crisis.

"Don't pay attention to naysayers," Information Minister Jorge Rodriguez said. "With oil income, with taxes and income from gasoline price hikes, we'll be able to fund our program."

Since Sunday, electronic transactions have been suspended in the country in order to facilitate the currency switch. However, considering that Venezuela has made similar moves before, hopes are less than high that the reforms will work.

"Everything will stay the same, prices will continue to rise," 39-year-old Bruno Choy, who runs a street food stand in Caracas, told AFP.

  • Protests in Venezuela

    Venezuela on the brink

    The last straw

    In March 2017, violent protests erupted across the country in response to a Supreme Court decision to strip the legislative branch of its powers. Amid an international outcry, President Nicolas Maduro reversed the decision, but it was too late. Thousands continued to take to the streets, calling for new elections. More than 100 people were killed in clashes with security forces.

  • Empty shelves at grocery store

    Venezuela on the brink

    Hunger, a growing problem

    The violence added to the ongoing economic and political crisis in Venezuela. Many Venezuelans spend more than 30 hours a week waiting in lines to shop, and are often confronted with empty shelves when they finally enter a store. President Maduro blames the crisis on US price speculation. The opposition, however, accuses the Socialist government of economic mismanagement.

  • Venezuelans in Colombia gathering medical supplies to send to their home country

    Venezuela on the brink

    Health care in crisis

    The crisis has even affected health care in the oil-rich nation. Venezuelans often head to Colombia to collect medical supplies to send home, as seen in this picture. Hospitals across Venezuela have compared conditions to those seen only in war zones. As patient deaths rise, health officials have sounded the alarm on the rise of malaria and dengue fever.

  • Venezuela President Nicolas Maduro in Caracas

    Venezuela on the brink

    Power grab

    By July 2017, Venezuela's pro-government Constituent Assembly was established. For observers, it had all the hallmarks of a power grab. The new body adopted the authority to pass legislation on a range of issues, effectively taking away the powers of Venezuela's elected congress, which was under the opposition's control. The move drew wide international condemnation.

  • Angela Merkel meets Venezuelan opposition lawmakers in Berlin

    Venezuela on the brink

    The West sanctions

    In response to the political crisis, the United States and European Union imposed a series of sanctions against ruling officials. The US blacklisted members of the Constituent Assembly and froze all of Maduro's assets that are subject to US jurisdiction. The EU banned arms sales to the country.

  • Maduro shows a map of municipal elections

    Venezuela on the brink

    Government victorious in regional elections

    In October 2017, Venezuela held two votes: regional elections and elections for governors, which were long overdue. The opposition boycotted the vote, but then split, as some candidates and small parties chose to participate. This caused a deep rift within Maduro's opponents. The government went on to sweep the vote, which detractors say was unfair and heavily favored the regime.

  • Venezuelan protester holds a banknote

    Venezuela on the brink

    Debt default

    In November 2017, the oil-rich, cash-poor nation faced its day of reckoning. Credit ratings agencies declared Venezuela and its state-run oil company in "selective default." But Russia offered to restructure the South American country's debt to ensure Caracas pays its other creditors. US and EU sanctions, however, limited the chance of an agreement.

  • Presidential elections scheduled for May 20

    Venezuela on the brink

    Presidential elections scheduled

    The National Assembly announced in January 2018 that it would grant Maduro's call for snap presidential elections. The electoral authority, CNE, held the elections on May 20. The EU, the US and 14 Latin American nations warned that they would not recognize the results. The mainstream MUD opposition alliance boycotted the vote, leaving only one possible outcome.

  • A voter casts his ballot in Venezuela's controversial presidential election

    Venezuela on the brink

    Maduro wins ...

    Maduro was re-elected to a second six-year term with about 68 percent of the vote. Turnout was only 46 percent, according to electoral authorities. However, the MUD opposition alliance put turnout at less than 30 percent. The Organization of American States (OAS) called the elections neither free nor fair.

  • Juan Guaido in Caracas

    Venezuela on the brink

    ... Guaido assumes power

    But weeks into the new year, the situation took a drastic turn. On January 23, 2019, parliament president Juan Guaido declared himself interim president of Venezuela — a move that was quickly recognized by US President Donald Trump. Maduro called it a US-backed "coup." Days later, the US sanctioned Venezuela's state oil firm, while Guaido staked his claim on the country's foreign assets.


aos/uhe (AFP, Reuters)

DW recommends

Venezuela: What can a bolivar buy?

The Venezuelan currency has become near-worthless due to a spiraling hyperinflation. Reuters photographer Carlos Garcia Rawlins found a unique way to show how many bolivars one must carry for grocery shopping in Caracas. (20.08.2018)  

Related content

23/03/2022 Cottbus. Ein Junge hält eine kleine Summe ukrainische Münzen und Geldscheine in die Kamera. Politiker mehrerer Parteien haben eine schnelle Lösung für den Umgang mit der ukrainischen Währung gefordert. Viele Geflüchtete hätten Schwierigkeiten, die Landeswährung Hrywnja in Deutschland umzutauschen.

Ukraine battles to avoid hyperinflation as war costs soar 27.08.2022

Ukraine's central bank has been de facto printing money to pay its troops, but the measure is unsustainable. More international support is vital, but how much new cash could be raised domestically?

People stand in line to withdraw money from an ATM in Sberbank in St. Petersburg, Russia, Friday, Feb. 25, 2022. Russians flocked to banks and ATMs on Thursday and Friday shortly after Russia launched an attack on Ukraine and the West announced crippling sanctions. According to Russia's Central Bank, on Thursday alone Russians have withdrawn 111 billion rubles (about $1.3 billion) in cash. (AP Photo/Dmitri Lovetsky)

Is Russia's economy really hurting? 06.09.2022

Despite Western sanctions, Russia seems to have won the energy market. But some say Moscow will soon run out of cash.

(191013) -- MT DARWIN, Oct. 13, 2019 () -- Children fetch water from a well in Mt. Darwin, Zimbabwe, Oct. 11, 2019. Zimbabwe is facing severe food shortages due to a combination of drought and cyclone this year. (Photo by Shaun Jusa/)

Zimbabwe banks on cows as inflation soars 29.08.2022

Investing money into cattle is a growing business in Zimbabwe, where inflation is skyrocketing. Many people now consider it safer than putting money in the bank.