It is also planned to print banknotes with new values. Since 2008, the Bolivarian government has implemented three currency conversions, and in total the bolivar has lost 14 zeros.
According to BCV, the digital bolivar will facilitate the use of a “modern version of the currency” in everyday transactions so that citizens have a “greater connection” to the Venezuelan currency.
For the launch, notes 5, 10, 20, 50 and 100 of the digital bolivar will be issued.
Anxious residents are rushing to use the existing banknotes of the Venezuelan currency, considering that in October, the current currency, the sovereign bolivar, will lose much of its value.
The national currency had several titles. At first it was just a bolivar, then a strong bolivar, and recently a sovereign bolivar, now it will be called a digital bolivar.
With dozens of notes from the current Venezuelan currency, it is possible to buy a kilo of rice, for example, that costs about five million bolivars. People prefer to use the money to buy food rather than deposit it in the bank, lest they lose purchasing power after the transfer.
Venezuela has always been a country of poor millionaires. The prices of most products exceed the value of millions of bolivars. The same is happening with the minimum wage, which is currently seven million bolivars, about $1.75 (or 8.75 Brazilian real), but product prices far exceed this value.
Everyone earns millions of bolivars, but this does not mean that the population has high purchasing power. Quite the opposite. Many Venezuelans are unable to even purchase a basic food basket.
About 96.2% of the population lives in poverty and 79.3% in an extreme situation, according to surveys by the National Enkovy Living Conditions Survey, which presents data from 2019-2020.
Electricity or water supply services, especially in commercial establishments, have values in the billions of bolivars.
Another problem caused by the many zeros in the Venezuelan currency is that the display of calculators or merchants teller no longer contains many numbers. It is difficult to make calculations in the country led by Nicolás Maduro.
A few months ago, banknotes of five hundred thousand, one million and two million bolivars were in circulation. Its use is almost exclusively on public transport.
Facade of the Central Bank of Venezuela in Caracas. Photo: Reuters/Marco Bello
The Brazilian Real is trading in Venezuela
There are not enough bolivar papers to make such high value payments on a daily basis. Instead, the currency used for most payments, even if it is not the official currency, is the dollar. Other foreign currencies are also used to replace the bolivar. In the city of Santa Elena de Uairén, in southern Venezuela, the Brazilian real has replaced the Venezuelan currency.
Residents are seeking information to avoid confusion due to zero devaluations associated with currency conversion.
And BCV announced in a statement that “all monetary values, expressed in the national currency, will be divided between one million.”
Another unreliable factor is whether reconversion will replace the emergence of new zeros associated with prices as a result of rising inflation.
The measure aims to “facilitate the use of the currency by providing a simpler monetary scale,” according to a BVC statement.
Residents expected six zeros to be cut for the second half of August. However, this postponement of the entry into force of the new currency will serve to issue new banknotes at the updated values with the conversion.
Another novelty will be the return of coins to be used in Venezuela. Coins have not been circulated in the country for years. Its value has lagged because it cannot keep up with the accelerating pace of hyperinflation. Between January and May this year, inflation was 264.8%, according to BCV. The cumulative inflation rate was 2,959.8% in 2020.
For economic analysts, cutting zeros on the bolivar was already expected and would make calculations easier, but this does not mean that hyperinflation will end.
According to José Guerra, an economist and a National Assembly deputy elected in 2015, the new retransfer announced by the central bank is “made up” because it “will not reduce inflation.”
Opponent Omar Gonzalez Moreno stated that the digital bolivar would be a “giant factory for the poor”. For him, the new currency means “the continuation of another economic failure,” referring to the fruitless plans the government is implementing in an attempt to restore the strength of the Venezuelan currency.
Other economists agree, saying that stopping the devaluation of the bolivar is associated with other economic measures than simply cutting zeros from the national currency. Thus, the implementation of the digital bolivar, without the six digits, would be a palliative measure that would not prevent the re-emergence of zeros in the currency as a result of hyperinflation in Venezuela, one of the longest inflation on the continent and in recent history.
“Music fanatic. Professional problem solver. Reader. Award-winning tv ninja.”