Confusion reigns in Venezuela following a series of major reforms designed to stem the long economic and humanitarian disaster engulfing the country.
All at once the government has launched a new currency, the 'sovereign bolivar', with five zeros lopped off the old 'strong bolivar'; pegged the new currency's value to an as-yet-non-existent cryptocurrency called the 'petro', which in turn will be pegged to the price of oil, effectively devaluing the new currency by c95%; raised VAT by 4% (from 12% to 16%); lifted the minimum wage and pensions by 3 464%; and all-but abandoned fuel subsidies.
So many questions are left unanswered that it's impossible to predict the full impact of the changes on long-suffering Venezuelans and expatriate staff working in the country. While the redenominated banknotes should make cash shopping easier (assuming enough of them have been printed to meet demand), the relief from needing to carry cash around in big bags and wheelbarrows might prove temporary because inflation is certain to keep rising fast. Annual inflation has already reached 86 000% according to the National Assembly and could hit one million percent by the end of the year, according to the IMF.
The new and old currencies will co-exist for an unspecified period of time, according to the government, raising even more questions about equivalence when the two are supposedly backed by different things. The sovereign bolivar is called a 'paper currency' in the published reforms, so does that mean the old currency will still be used for card transactions and, if so, will it still be governed by the DICOM exchange rate, which remains 60 times overvalued compared to the new devalued rate?
We will keep studying the changes to see what they might mean for your assignees in Venezuela and will report again at the end of the month. In the meantime, you can read more about the reforms here (NB 'Venezuelanalysis' is generally more sympathetic to the government than most international media), while here is the Guardian's take on why the reforms are probably doomed to fail.