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The economy of the oil country is in its fifth year of recession and is experiencing the first hyperinflation in its history, according to data processed by the International Monetary Fund
CITY OF MEXICO
On Wednesday, the president of the Venezuela Nicolás Maduro ordered to postpone the expected monetary reconversion for the second time, now until August 20 While announcing that he will submit a reform monetary policy for the attention of the Constituent Assembly.
In addition, he informed that they will eliminate five zeros at the bolivar and not the three that it was planned to erase with a reconversion originally planned for the beginning of June and August 4th.
Although the Venezuelan president did not specify the reason for the postponement, the president announced the launch of an "economic stimulus package" which will include other measures that the government is preparing.
The monetary reconversion is an adjustment of the nominal value of a currency, but it does not correct the fundamental problems of this currency or the economy, according to Mauricio Tavera, Analyst senior at Prognosis Economía Finanzas e Inversiones .
While the Central Bank of Venezuela explained that it was about the total modification of the current monetary cone. This involves the change of monetary scale and all that is expressed in bolivars.
Why is this measure being applied?
The Central Bank of Venezuela explained the purpose of the measures announced Wednesday by the Venezuelan Government:
As part of the counter-offensive actions to normalize the economic apparatus National Bank of August 20 will be removed five zeros at the current monetary cone, in this way 100,000 current Bolivars will become a sovereign Bolivar, reads a tweet from the Central Bank of Venezuela. [19659015] #EnVideo | The Sovereign Bolivar will enter into force on August 20, 2018 as part of the Economic Recovery Program announced by the National Executive.
| #NewCanadaEconomico #Conitoring Reconversion #Petro pic.twitter.com/ bClP1Tp6pu
– Central Bank of Venezuela (@BCV_ORG_VE) July 26, 2018
In addition, the agency notes that this measure aims to combat the effects of the economic war currently confronting to the Venezuelan people.
The oil country's economy is in its fifth year of recession and is experiencing the first hyperinflation in its history, according to data processed by the International Monetary Fund ( IMF ) and a congressional measure d & # 39; opposition.
Monday the IMF projected that Venezuela's inflation could end the year with a record change of one million percent and repeat a crisis similar to that experienced by Zimbabwe at the end of 2000.
The Central Bank of Venezuela noted in social networks that the currency conversion is accompanied by a new family ia of banknotes that will boost the availability of money in the country.
For Marco Oviedo, Director of Barclays' Latin American Economic Research, Venezuela's monetary reconversion "is the product of high levels of income". inflation in the country.The International Monetary Fund estimates that inflation in Venezuela will be one million percent.The currency is losing value quickly, so for simplicity you need to remove zeros to the currency and prices "
In the same vein, remember that this measure is similar to what happened in Mexico in 1993. [19659014] Something similar happened in Mexico in 1993 when 3 zeros were removed from the peso, because of the high inflation rates in the 1980s arising from the debt crisis of 1982. It should be noted that this did not reach Venezuelan levels "[19659027] For its part, the director of Econometrics Henkel Ga rcía pointed out that the measure is made to facilitate transactions and payments within It involves the modification of different business administration systems, as well as the banking system. This takes time, especially for the banking system, because it is through this that the majority of transactions are made. and payments The given term (for Venezuela) seems too short, "said the analyst.
With information from Reuters
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