It was only to be expected the Venezuelan government had to do something before a national cash shortage would get out of hand. Now that the 100 bolivares cannot be replaced by the new currency, there is no other option than to keep the bill in circulation a while longer. As things stand right now, the new deadline to exchange 100-bolivar notes to new currency is set on January 2, 2017.
A reprieve For Venezuela, But At A Cost
Although some people will be glad to hear they can hold onto their existing bolivar banknotes for a while longer, a lot of damage has been done already. The new 500-bolivar notes, as well as the new coins to be used instead of 100-bolivar notes, have not been brought in circulation sufficiently. As we mentioned yesterday, this would cause a lot of friction in a country plagued with hyperinflation.
After many people tried to wait in queues to exchange old notes for new ones, the situation has become very tense. Most shops are no longer in operation due to a cash shortage, leaving citizens unable to buy food and other necessities. All of this lead to anger and public outcry, resulting in six cities seeing stores pillaged and looted.
Preventing smuggling is the primary objective of this cash note swap, although it is doubtful this will be a positive measure. Inf act, one could argue getting rid of the old 100=bolivar banknote will do nothing to alleviate smuggling, corruption, and money laundering in the country. Criminals and people in a seat of power have already moved their wealth into different assets, and holding cash is the least of their priorities.
What is rather intriguing is how President Maduro claims there is over 300 billion bolivars worth of 100-bolivar notes stashed in warehouses in Columbus. It is known a lot of Venezuelans tried to pass the border to Colombia where they could buy goods before this cash ban went into effect.
It is evident the financial situation in Venezuela will not improve anytime soon. If even the government and central bank cannot stick to their deadline for swapping old currency for new notes, there is no rosy future to look forward to. Bitcoin demand in the country continues to rise slowly, and the demand will be fueled even more now that these delays are taking place.
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