Not too long ago, the financial crisis in Venezuela took a major turn for the worse. Banknotes have to be replaced with higher denominations, and the current largest bill is to be replaced by coins of the same face value. To make matters worse, citizens had until yesterday evening to make these conversions. But the new bills and coins have yet to arrive at most banks want ATMs, rendering the situation in the country unlivable.
Venezuelan Economy Is Messed Up Beyond Repair
Giving the people a deadline of 72 hours to convert Bolivar notes to coins is not the smartest idea the Venezuelan government ever had. Introducing 20,000 bolivar notes in the same period only put more pressure on the local economy. Now that neither new bills or coins have shown up in time to meet consumer demand, things are getting out of hand at an alarming pace.
The situation unfolded a many people would expect: queues outside of banks and near ATMs are growing longer by the minute. In a way, this draws quite a few parallels to what is happening in India, as that country is going through a very rough patch as well. But in Venezuela, exchanging or depositing cash will be a lengthy process, as it is doubtful the situation will be resolved before the weekend.
The 100 bolivar bill, which is now effectively deemed useless in the country, can no longer be used to pay for goods or services. Nor can it be exchanged for new currency, as there is insufficient supply to accommodate all conversions. The only option is resorting to bills with smaller denominations, even though those will run out rather quickly as well.
Central Bank of Venezuela’s President issued a statement explaining how the new bills and coins will be distributed ‘in a progressive manner”. However, it remains unclear what kind of time frame we are looking at. It is safe to say the Venezuelan government has bitten off far more than they can chew, and the people are paying the price for this mistake.
Finding a reason for the delay in new bills and coins is not difficult. Venezuela’s economy is in such a bad shape; they have to outsource the minting of new currency.Right now, that process is handled by Crane Currency in Boston, but the company failed to comment on the current delays. But hardly anyone expected this transition to go smoothly, as that is not how things work in the real world.
Even though most people would not like to admit, such drastic economic turmoil could hit any country in the world over the next few years. Governments are more keen to withdraw bills from circulation than address the real issues. Fixing fiscal deficit and inflation should have been the top priorities. It is not unlikely to think a lot more people will try to get their hands on Bitcoin to avoid further inflation in Venezuela.
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