08.13.18: The Deformity

During a televised address this evening, Maduro made a series of announcements regarding the recent vehicle census, gas prices, and the deployment of the Bolivar Soberano (Bs. S.), the new currency that is set to replace the Bolivar Fuerte (Bs.) starting this upcoming Monday.

In his speech, Maduro said that next Monday would be a holiday, allegedly with the intention of easing the Bs. S. into circulation. At the same time, Maduro confirmed earlier suggestions that the Bs. and the Bs. S. would exist alongside one another, saying:

I declare Monday August 20 a holiday, so that the process of deploying the new currency can begin, [and] it will coexist with the old and work for daily retail transactions.

The “coexistence” arrangement means that starting on Monday, Venezuelans will be able to use two different currencies to purchase good and services. Once it enters circulation, the Bolivar Soberano will remove five zeroes from the Bolivar Fuerte, meaning that goods and services will have to be priced accordingly.

By way of example, Maduro’s plan means that a Venezuelan wanting to buy a candy bar at bodega starting next Monday will be able to pay either Bs. 10,000,000, or Bs. S. 10, depending on which currency she is carrying.

Gasoline Will Be Sold at “International Prices”, Some to Receive Subsidy

The most important announced made by Maduro tonight deals with the country’s gasoline prices, which are at the moment the cheapest on the planet.

Maduro said that starting on August 20,  Venezuelans will pay “international prices” for gasoline. Anyone who has registered with the vehicle census–which is scheduled to run until Friday–will then receive a subsidy, while anyone who has not registered their vehicle will not. Maduro said that this measure would be in place for two years, and explained it in the following way:

We’re going to make a system of direct subsidy, progressive, in a two-year plan, which in accordance to the character of the recovery of the purchasing power of the Bolivar Soberano which is pegged to the Petro, at two years–at the most–we will have resolved the deformity that has been created over many years [sic].

Since the mid-20th century, Venezuelans have considered cheap gas prices patrimony. Gasoline is by far the least expensive item for purchase in the country. The last time that a Venezuelan government attempted to raise gas prices was in 1989, and the measure in part caused El Caracazo.

Gas prices in Venezuela are so cheap that they are difficult to quantify, specially given the country’s hyperinflationary crisis. Francisco Monaldi, an expert on Venezuelan oil policy, posted the following message on Twitter as he tried to come to terms with Maduro’s announcement:

Bolivar Soberano Will Be Pegged to the Petro

Maduro also said that starting on Monday, the value of the Bolivar Soberano will be pegged to the Petro, the regime’s in-house cryptocurrency. Launched in late February of this year, the Petro was itself designed to be backed by the country’s oil reserves.

The Petro has been universally panned by experts as a failure, both conceptually and in its execution. Weiss Cryptocurrency Ratings called the Petro “like painting lipstick on a pig”, pointing out that it lacks even the most basic requirements for a cryptocurrency and is in fact a more traditional fiat currency,

Questions/Comments? E-mail me: invenezuelablog@gmail.com