Venezuela Currency Recall Causes Chaos and Confusion

HAVANA TIMES – Venezuelans began rushing Monday to shed their 100-Bolivar bills, currently the highest denomination in the country (although only worth US $0.025), which will be out of circulation in 72 hours by a presidential order.  Days before Nicolas Maduro also announced the launch of a series of higher denomination notes.

Confusion seized the economy on Monday, a bank holiday, because several businesses decided not to accept the soon to be extinct bills. In the streets, bus stops, bakeries and shops people could be seen trying to spend their 100 Bolivar notes for any product.
However, private transport, kiosks and other establishments accepted them with the idea of exchanging them for the new bills.

The Central Bank of Venezuela will put into circulation as of Thursday December 15th new bills of 500, 1,000, 2,000, 5,000, 10,000 and 20,000 bolivars, as well as 10, 50 and 100 bolivars coins.

The measure recognizes the advance of inflation, for which there are no official figures, but independent sources estimate that it will close 2016 between 600 and 700 percent.

In the country, the exchange control imposed in 2003 is still in force, currently with two official rates, a preferential rate of 10 bolivares per dollar and a complementary rate of 670 bolivares. The exchange on the street climbed in recent weeks to 4,500 bolivars.

Maduro announced Sunday that 100-bolivar bills will be without legal effect to “hit” the mafias who smuggle paper money and take it to Colombia to “destabilize the economy.”

Maduro said that the bills are bought by the Colombian “mafias”, who store them by millions and export them to other countries, in order to weaken the economy and cause discomfort among Venezuelans.

Interior Minister Néstor Reverol met with the National Banking Association to explain the reasons for the move and coordinate the withdrawal of the bill.

He said a two-year investigation found that 100 Bolivar bills are stored in warehouses in Colombia, from where they are shipped to Europe, but are also stock piled in Spain, Germany, the Czech Republic, Switzerland and the Ukraine.

“This is part of an attempted financial coup. This type of operation has been applied in Iraq and Syria to overthrow their governments, with the breakdown of the financial system,” he said in his statement to the bankers.

Maduro said that the “flight” of money to Colombia has reached more than
300 billion bolívares.

Reverol also said that the US Treasury Department is linked to the operation to “take the money, stifle the Venezuelan financial system and create discomfort in the population.”

The departure of the currency will be complemented by a security operation on land, air and sea routes. “The money will not enter the banking system again, this is financing terrorism and organized crime and as such will be punished,” he said.

Luis Vielma, governor of the state of Táchira, on the border with Colombia, said that 100-bolivar bills were used to counterfeit dollars and “that’s why they are so wanted.”

The opposition deputy and economist Jose Guerra said that the measure of getting the bill out of circulation and exchange it within few hours is “reckless.”

“To get rid of the 100 Bolivar bills in such a short time the BCV must have an equivalent amount in bills of greater denomination. The national currency is defended by lowering the fiscal deficit and inflation, not removing paper money,” he said.

Related post:  Venezuela presents new currency notes.