Petro Cryptocurrency: Solution or Scam for Venezuela?


By Osmel Ramirez Alvarez

Nicolas Maduro and his petro currency.

HAVANA TIMES — TeleSur, the Venezuela based satellite TV channel we see here in Cuba, has unleashed a media avalanche/advertising campaign for cryptocurrencies recently, especially the Petro. Presenters sound like real economy professors. This virtual currency is being pushed by Nicolas Maduro’s Government as part of his last minute initiatives to alleviate the critical economic crisis the country is facing and to give hope to his followers.

But, we need to ask: what is the Petro? And, is it really a solution?

Experts talk in favor and against: supporters argue the “pros” of cryptocurrencies while opponents argue the “cons”. Everyone has an opinion. People being hesitant makes sense, it has its advantages and disadvantages.

The Petro wants to piggy back on Bitcoin’s success, the exchange, use and growing security of which helps to create trust in virtual currencies. There is even a global movement of cryptocurrencies being born and many people claim it will be the dominant currency in the future.

Now, recognizing and giving cryptocurrencies a vote of trust is one thing while the Petro matter is another one altogether. The fact that a government in all kinds of crisis, which invents anything it wants to without abiding by ethics or the law in order to keep itself in power, under the principle of the end justifies the means, arouses suspicions, of course. And you have to be very suspicious when it comes to money because it sharpens even the dimmest minds and switches on a light to make them come up with a scam.

The most obvious difference between a cryptocurrency and fiat money is that no group or individual can speed up their production and use them illegally or abusively in a significant way, as a set number of units are created together, at a rate that is limited by a value that has been determined beforehand and is public knowledge. 

Before economists out there “badger me”, let me make it clear that this is only a simple citizen’s interpretation who has a vague knowledge about finances and concepts which are so abstract for those of us who don’t have to deal with them on a regular basis. I am only following my common sense and it makes me distrust the Petro.

I am especially not rejecting the idea that cryptocurrencies might become our money in the future and I watch as they grow, evolve, winning space, at the same pace that the economy on the whole is growing with digital technologies. However, even though Venezuela has launched the Petro in this context, it has also created it at a time when it is experiencing its worse crisis with unusual characteristics. The question needs to be asked, is the Petro a cryptocurrency? Does it meet the intentions of this currency initiative that attempts to be anarchist?

I can see that it does from a virtual perspective, but one of cryptocurrency’s objectives is to prevent superiority of currencies controlled by hegemonic governments or economies. I don’t believe that public interest lies in governments controlling it or backing it with natural resources or riches of any kind, like what is happening with the Petro.

I understand that the intention is the complete opposite, to create an anarchist thing which isn’t subject to any powerful, economic or national group controlling it. Not even being able to …creates doubts around its use, making it attractive for criminal transactions. That’s why several countries have banned crytocurrency or don’t recommend using it, at least. Bolivia, Venezuela’s ally, was the first country to ban them.

According to what I understand, “backing” a crytocurrency lies in just how hard it is to create an algorithm which protects it and makes it possible, to give you an analogy as an example, as hard as it is to extract gold from the Earth’s crest. And the achivement of those who voluntarily dedicate themselves to this, called “miners” is a payment in fractions of the currency.

In Bitcoin’s case, they intentionally tried to make it a collective process. The idea of backing it up with riches, setting an initial price and auctioning a quantity of a cryptocurrency, which has been launched and managed by a government, goes against its very concept.

In my humble opinion, “I saw this “Maduro” initiative, as a dressing up a trap or a trick, which will fall upon the Venezuelan people. If owning natural resource reserves were to assess the value of a currency, the strongest currency in the world would be an Africanone. On this continent, where poor economies and devalued currencies prevail, there are huge reserves of valuable minerals. Or Bolivar himself could assess it with the Orinoco River and be valued at more than an euro. Natural resources don’t support a currency, it’s the economy, its success and strength that do.

On the other hand, how can anyone believe that its right to auction off a virtual currency, valued at US $60 per unit, and receive 5 or 6 billion tangible and concrete US dollars, protected by millions of barrels of oil which hasn’t been extracted and won’t be in the coming decades. Don’t they receive this capital out of the blue, selling a product where the infrastructure to create it still doesn’t exist?

From this perspective, Petro currency seems more like a treasury bill from Venezuela, tied to the future in disguise in their desperate eagerness to get their hands on hard currency. The biggest buyers, who have already made their intentions clear, have done so knowing that tomorrow, whoever is ruling Venezuela will need to honor the payment of these sums in case the Petro goes bankrupt, as a set value was determined beforehand which the State supports. There isn’t any risk that it will stop using this foundation, just the chance to go up.

And in the last scenario, “powerful governments” will be able to pressure repayments in this globalized and interdepent world, where a State is always a good debtor because, unlike private businesses, it can never go bankrupt.

Oil from the Orinoco River will be left “to the future”, compromised and determined. The worst thing is that these thousands of millions of dollars will be thrown into the mud, as what chance does this government have of investing it properly, “with an eye for business”, and muliply it in order to benefit the country. Especially after squandering the super oil revenues that were coming in for over a decade. What confidence is there?

This is a simple analysis about the Petro cryptocurrency. It’s my instinct that makes me doubt, but I do see it as a channel towards continuing to receive billions for their unproductive and “worn out” People’s Power politics, once physical and tangible oil is, with all expenses paid, no longer so profitable.

It looks like a trap which, in my opinion, has been set out to deceive the Venezuelan people more than anyone else.