The new cryptocurrency will devalue Venezuela’s physical currency more than 95 percent and radically weaken its exchange rate – going from 250,000 to 6 million bolivars per U.S. dollar. Furthermore, the sovereign bolivar will be worth 100,000 strong bolivars.
Analysts outside of Venezuela believe the new measures will only make matters worse.
“Unless Venezuela adopts a completely news currency regime – like a currency board, or dollarization – the bolivar will face the same fate as did the Yugoslav dinar,” said Steve Hanke of Johns Hopkins University. The Yugoslav currency was eradicated by massive inflation.
The International Monetary Fund also shares Hanke’s skepticism.
President Maduro, however, has a different take on the new currency.
“I want the country to recover and I have the formula. Trust me,” Maduro said in a televised address.
President Maduro is a firm believer that the country is a victim of an “economic war” that is being waged by “imperialists” and the United States.
The U.S. has imposed multiple sanctions on Venezuela for its rigged elections.
Because of the downtrodden economy, more than 2 million Venezuelans have fled the country since 2014 – 500,000 have fled this year alone. This mass exodus has led many neighboring countries to block entry to Venezuelan migrants.
Protests and strikes against the new recovery package are currently ongoing. Many are skeptic that the new plan can fix an economy so broken that the Venezuelan version of Who Wants to be a Millionaire had to be nixed because the prize had become worthless.
Apart from the new currency, Venezuela is also raising the minimum wage by 3,000 percent.
Currently, 90 percent of Venezuelans live in poverty.
So, with the country in complete shambles, is it safe to say that socialism doesn’t work?