Just one day after Venezuela's historic currency devaluation, which lopped off 5 zeros from the currency and prices while bizarrely pegging the "sovereign Bolivar" - the country's latest currency incarnation - to the petro, an oil-backed cryptocurrency (which has been banned by the US Treasury), chaos has predictably returned to the country with the greatest petroleum deposits in the world.... and hyperinflation failed to depart for even one day.
That what Henrique Rosales discovered when he went to an ATM on Tuesday - the day after Venezuela's historic currency transformation took place - to withdraw Venezuela’s new currency: he found it dispensed a maximum of 10 sovereign bolivars a day, the equivalent of 15 U.S. cents.
"This money is going to disappear out of my hands in no time," said the 29-year-old waiter, who told the Wall Street Journal he hasn’t seen cash in five months. He hasn’t been able to pay for bus fare and walks several miles a day from his hilltop slum to the seafood eatery where he works.
"I’m realizing the government has no plan to get us out of this nightmare. What a disaster."
Rosales' reaction was predictable (we previewed the chaos that lay in store for the Latin American socialist paradise over the weekend): he is among the many Venezuelans swept by confusion and anger as the government of President Nicolás Maduro rolled out its latest economic overhaul as part of its struggle to keep up with the world's greatest hyperinflation, surpassing even that of the Weimar Republic.
Maduro called the measures “a really impressive magical formula” intended to stabilize the economy, including a new, highly devalued currency as well as tax and wage increases.
It wasn't magic: the country's new "sovereign bolivar" is identical to the old currency, which was named the strong bolivar, except the new bills miss five zeros. This was the government’s "answer" to a broken economic model that has seen prices double every few weeks.
Many shops remained closed, unable to obtain the working capital they need to transact; other shopkeepers said they had no idea how much to charge customers, while others, like construction worker Pablo Delgado, 44, doubted that a country suffering through dire food shortages and faltering public services would soon see a return to stability.
"For me," he said, “none of this is going to make any difference. Maduro says prices aren’t going to rise. But three days after his announcement, we have seen that they’re rising."
That's an understatement.
As we reported previously, on Friday night president (or as the White House calls him "dictator") Maduro - promising to contain inflation that has made a mockery of local workers' savings and labor - announced that he would introduce the new currency. Banks, which opened after a long holiday weekend - Monday was "made" into a mandatory holiday to give institutions an extra 24 hours to figure out the chaos - made the new bank notes available on Tuesday. And while ATMs appeared to have a daily withdrawal limit of 10 sovereign bolivars, bank tellers were willing to hand over 50, less than $1 a day.
Well before noon, most ATMs in east Caracas were out of cash according to the WSJ. Those standing in line to see a teller used their phone calculators to figure out how much money they could withdraw (they didn't like the answer).
Worst of all, the hyperinflation was not only back, but worse than before because within just a few hours of the new currency’s debut, its value had dropped nearly 10% to 65 sovereign bolivars per dollar, according to DolarToday.