Venezuela on Friday launched its second monetary overhaul in three years by cutting six zeros from the bolivar currency in response to hyperinflation, simplifying accounting but doing little to ease the South American nation’s economic crisis.
The plan seeks to makes accounting more straightforward at businesses and banks, where systems can no longer handle the huge figures. Venezuela’s year-on-year inflation is 1,743%, according to the Venezuelan Finance Observatory. A minimum wage salary is barely $2.50 per month.
“Honestly, I think hyperinflation is too strong, this is already the third reconversion,” said Alfredo Bohorquez, a 55-year-old selling drawings on a boulevard in eastern Caracas. “This one will last three or four years, maybe less.”
President Nicolas Maduro’s government in 2018 removed five zeros from the currency due to high prices. That came a decade after the late President Hugo Chavez subtracted three zeros from the bolivar with the promise of single-digit inflation, which was not achieved.
The once-prosperous OPEC nation is suffering a years-long economic crisis that has led millions of Venezuelans to emigrate. Maduro’s socialist government blames U.S. sanctions for the country’s woes, while critics assign responsibility to interventionist macroeconomic policies.
The widespread adoption of the U.S. dollar for commercial transactions in Venezuela will further dilute the relevance of the new scheme. Bolivars in cash in Venezuela are rarely used for routine purchases.
Many people on Friday were using dollars in cash for purchases in supermarkets, pharmacies, and stores selling school supplies and uniforms, Reuters witnesses said. Bank systems were functioning normally after an hours-long planned outage early on Friday morning as they converted to the new currency scheme.
“The economic imbalances in the country are very acute and the zeros that are being removed today will soon return,” said economist Jose Manuel Puente. “The reconversion will have no impact in macroeconomic terms.”