For the third time in 13 years, Venezuela makes a redenomination of its national currency, the bolivar. The central bank announced this Thursday, August 5, that, as of October 1, 2021, a new monetary cone for the so-called “digital bolivar” will enter into circulation. The currency will be released with a cut of six zeros that the current sovereign bolivar will inherit.
The institution’s measure was unofficially aired in July, so its formalization was expected for the third quarter of anus. Now all monetary amount in bolivars must be divided into 1,000,000 . If a local saver has, for example, 100 million bolivars in the bank (about $ 24.7 at the official exchange rate), then from October he will have 100 digital bolivars.
To adjust to the new changes, the national bank will modify its systems and the State itself will begin to issue a new family of banknotes and even a 1 bolivar coin. The situation has generated reactions among Venezuelan economists who believe that eliminating zeros from the currency does not solve the problem.
If not corrected, there would be another conversion of the bolivar
According to the economist Tamara Herrera, director of the consulting firm Síntesis Financiera, beyond eliminating zeros from the bolivar, the government must apply reforms to generate stability, confidence in the country and stop inflation which, according to estimates, reached a rate of 2,950% between June 2020 and May 2021.
«If you do not have that framework of reforms carried out, obviously we are going to continue with that. At the current inflationary rhythm, a new conversion would surely be falling in a period of 2 or 3 years, “explained Herrera, who added that the problem of paying with cash in both bolivars and dollars still persists.
Regarding the reasons that would have forced the government to apply a new reconversion, Herrera indicated that there was pressure because the transactions in the country they have become unmanageable. The commercial sector, businessmen and banks themselves would have indicated the need to implement the change.
Digital Bolívar, fewer banknotes in Venezuela?
Another of the economists who presented his point of view was Luis Arturo Bárcenas, chief economist at the Ecoanalítica analysis firm. According to the manager, the measure was something that the economy demanded, especially the private sector . The reason is that, in a hyperinflationary environment, transactions have reached very complex amounts.
Bárcenas highlighted the fact that it is likely that the amount of banknotes needed in the economy will not be issued. The reason is that it would be pointing to a digitization of the currency. “By putting the digital bolivar in the foreground, it means that many of the transactions are now going to migrate to the digital scheme,” he said.
The problem is that, according to Bárcenas, the total adoption of a digital bolivar faces multiple obstacles such as connectivity, the need to invest in a technological platform and that banks in general adjust all their systems.
For the executive at present there is a kind of “clash of forces” between the banks and the government. The former would be targeting the processing of digital payments in dollars , while the latter seek to increase operations in bolivars, something that would be in line with the monetary sovereignty slogan promoted by the government .
Instant transactions with bolivars
The digital bolivar would have several objectives and not just being part of a currency conversion. At least that is what Henkel García, director of the econometric analysis firm, believes. For the chemical engineer, an electronic bolivar is not the same as a digital bolivar.
«The electronic bolivar is different from the digital bolivar. With the first the transfers are not instantaneous. With the second, yes, because they would be through a monetary base. Nowadays, the only contact we have with a monetary base is through cash », commented García through his Twitter account.
According to the executive, the digital bolivar It seems to be a much broader and more ambitious project that would make it possible to boost transactions in the country. For García, the government announcement does not totally exclude bolivars physically, but rather speaks of a coexistence with its digital counterpart.
Applying a monetary reconversion for the third time suggests that the previous two did not work. However, the government of Venezuela, faced with the hyperinflation that it has experienced for more than three years, is using a resource that could give it room for maneuver on the monetary issue.
CriptoNoticias reported in February of this year that Venezuela and Argentina accumulated the highest inflation in the region in 2020. At the same time that in both countries the prices of products and services rise every month, a percentage of their citizens have turned to bitcoin as an alternative for safeguard of the value of their riches.
