The South American nation of Venezuela led by the socialist government of President Nicolas Maduro has been buckling under economic pressure set by the sanctions from the United States since a past few months. The country’s economic condition has exacerbated from bad to worse with inflation reaching sky-high with the value of its native fiat currency Bolivar going into a tailspin in the global economic market.
In an announcement last Friday, August 17, President Maduro devalued the nation’s currency by nearly 96% while attaching a single exchange rate to the Bolivar and attaching it to Petro, the country’s official cryptocurrency launched last year. Petro is an ERC20 token and backed by country’s natural resources.
As per the new guidelines, the value of one Petro would be equal to 60 USD which in turn equals to 360 million Venezuelan bolivars. In addition, President Maduro also announced the corporate tax rate, the minimum wage by 3000 percent, while also raising the subsidized gas price in the coming few weeks.
Venezuelans Are Finding Safe Haven In Bitcoin
Under the country’s continuously ailing economic conditions, Venezuelans have been massively moving their money into digital assets like Bitcoin while liquidating their fiats Bolivars since the beginning of this year. Moreover, Venezuela’s launch of Petro cryptocurrency has helped them little to avoid the woes of the U.S. economic sanctions.
Moreover, the country’s oil industry is facing huge problems due to the shortage of technical expertise and engineering equipment. The IMF has also warned that the country’s economy is expected to contract by nearly 18% this year while inflation is expected to shoot at 1,000,000 %.
In one of the latest blog posts, Alejandro Werner, director of the IMF Western Hemisphere department, wrote:
“We are projecting a surge in inflation to 1,000,000 percent by end-2018 to signal that the situation in Venezuela is similar to that in Germany in 1923 or Zimbabwe in the late 2000’s.”
The Venezuelan citizens have been finding it extremely difficult to meet the rapidly rising expenses and inflation. One of the country citizens said:
“Cash is almost useless as a method of payment. The biggest bill is 100,000 bolivars, which cannot be used to pay for anything. A small coffee is almost two million bolivars.”
A Caracas resident said that cash is only used to pay for public transportation and gasoline. The resident added:
“It is chaos! While people are often keen to use alternative methods of payment, it is not easy to find stores that accept bitcoin or cryptocurrency as legally you only can accept bolivares. There are there are some places I know that accept the cryptocurrency Dash as a form of payment, however.”
Venezuelan, Randy Brito, moved to Spain early in 2004 citing worsening economic conditions and speaks about his own non-profit organization BitcoinVenezuela.com that aims at educating the countrymen about Bitcoins. On the Reddit Ask Me Anything Platform, Brito writes:
“I’ve been educating about bitcoin in Venezuela since 2012, in our website, in social media, with collaborators in the country who gave talks, supporting local groups teaching about bitcoin there, running campaigns, giving interviews, podcasts. Besides trying to educate about economics, fighting Socialism both in Venezuela and Spain.”