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Venezuela pulls most common banknote from circulation to 'beat mafia' Venezuela pulls 100-bolivar note from circulation to 'beat mafia'
(about 7 hours later)
Venezuela, mired in an economic crisis and facing the world’s highest inflation, will pull its largest bill, worth two US cents on the black market, from circulation this week ahead of introducing new higher-value notes, President Nicolás Maduro said on Sunday. The Venezuelan government is to withdraw its largest banknote from circulation in its latest attempt to tackle the world’s worst inflation crisis.
The surprise move, announced by Maduro during an hours-long speech, is likely to worsen a cash crunch in Venezuela. Maduro said the 100-bolivar bill will be taken out of circulation on Wednesday and Venezuelans will have 10 days after that to exchange those notes at the central bank. President Nicolás Maduro said on Sunday that the 100-bolivar note, which is currently worth only two US cents (1.6p) on the black market, will be withdrawn on Wednesday. Venezuelans will then have 10 days to exchange the notes at the central bank.
Critics slammed the move, which Maduro said was needed to combat contraband of the bills at the volatile Colombia-Venezuela border, as economically nonsensical, adding there would be no way to swap all the 100-bolivar bills in circulation in the time the president has allotted. Maduro said the surprise move was needed to help stop criminal gangs profiteering on Venezuela’s border with Colombia. “We must keep beating the mafias,” he said.
Central bank data showed that in November, there were more than six billion 100-bolivar bills in circulation, 48% of all bills and coins. His beleaguered government has already announced plans to introduce six larger notes and three new coins from Thursday this week.
Authorities on Thursday are due to start releasing six new notes and three new coins, the largest of which will be worth 20,000 bolivars, less than $5 on the streets. Critics said the latest move was impractical and would not tackle the root cause of the country’s financial crisis. It also risks prompting a repeat of scenes witnessed in India last month when the withdrawal of highest value rupee notes prompted huge queues at banks.
No official inflation data is available for 2016 though many economists see it in triple digits. Economic consultancy Ecoanalitica estimates annual inflation this year at more than 500%. Writing on Twitter, opposition leader Henrique Capriles said: “When ineptitude governs! Who would possibly think of doing something like this in December amid all our problems?”
The oil-producing nation’s bolivar currency has fallen 55% against the US dollar on the black market in the last month. Maduro is facing mounting anger over his handling of the financial and political crisis engulfing Venezuela. In October, officials blocked an attempt to hold a referendum recall of his socialist government. Last month, plans for Vatican-brokered talks were put on hold after officials failed to attend meetings.
“When ineptitude governs! Who would possibly think of doing something like this in December amid all our problems?” two-time opposition presidential candidate Henrique Capriles wrote on Twitter, referring to the upcoming Christmas holiday. The opposition is seeking to oust Maduro, but authorities vow he will not leave office before his term ends in 2019.
Maduro previously has said that organised crime networks at the Colombia-Venezuela border buy up Venezuelan notes to in turn buy subsidised Venezuelan goods and sell them for vast profits in Colombia. Venezuela’s inflation rate is running at an estimated 500% and shortages of food and medicine have pushed the poorest members of its 30 million-strong population to the brink of a humanitarian crisis.
While smuggling of this sort is an issue at the border, it cannot account for nationwide shortages of the most basic goods from food to medicine, which have left millions hungry and doctors crying out for help. Paying for groceries without a credit card currently requires a rucksack full of cash. And the country’s credit-card machines have recently suffered problems, leaving many businesses asking customers to pay by bank transfer.
“I have decided to take out of circulation bills of 100 bolivars in the next 72 hours,” Maduro said. “We must keep beating the mafias.“ Central bank data showed that in November, there were more than 6bn 100-bolivar bills in circulation, 48% of all bills and coins.
Paying a restaurant or supermarket bill without a debit or credit card can often require a backpack full of cash. However, getting cash in recent months has proven difficult, and the country’s credit-card machines have recently suffered problems, leaving many businesses asking customers to pay by bank transfer. The oil-producing nation’s currency has fallen 55% against the US dollar on the black market in the past month.
Strict currency controls introduced in 2003 that pegged the bolivar to the dollar, coupled with heavy reliance on oil, are seen as the root of the crisis by most economists. Maduro has blamed an “economic war” being waged against his government by the opposition and the United States. Maduro has blamed an “economic war” being waged against his government by the opposition and the US. He has also singled out organised crime networks at the Colombia-Venezuela border for buying Venezuelan notes and subsidised Venezuelan goods and then selling them for vast profits in Colombia.
Money supply, the sum of cash and checking deposits as well as savings and other “near money” deposits, was up a staggering 19% in the three weeks to 2 December and the curve has been exponential since Maduro’s predecessor Hugo Chavez came to power in 1999. While profiteering of this sort is an issue at the border, it cannot account for nationwide shortages of the most basic goods from food to medicine, which have left millions of people hungry.
Strict currency controls introduced in 2003 that pegged the bolivar to the dollar, coupled with heavy reliance on oil, are seen as the root of the crisis by most economists.