Saul Jimenez just wanted to buy bread. But his trip to his neighborhood bakery in Venezuela's capital on Monday did not go well. His bank cards wouldn’t work.
Venezuela is in a state of economic crisis and collapse. (See Venezuelan Economic Woes at https://teen.wng.org/node/2472 and Dark Times for Socialist Venezuela at https://teen.wng.org/node/2584.)
Banks and most businesses were closed as Venezuela launched a series of dramatic economic reforms. They began with the release of a currency with five fewer zeros printed on it. It’s all part of a bid to tame soaring inflation.
Rampant inflation means it takes a fistful of bills to pay for a loaf of bread, so many Venezuelans like Jimenez rely on debit or credit cards. But with banks closed to reset their systems for the change, Jimenez, an attorney, couldn’t make a purchase. That same scene played out for others across Caracas.
The currency conversion is part of President Nicolas Maduro’s economic plan. He’ll next hike the minimum wage by more than 3,000 percent.
But how does reducing zeroes and forcing higher pay help? Where does the actual wealth come from to back these changes? Critics say the package of measures will only make the crisis worse. Economists agree. They predict acceleration of the hyperinflation Venezuela has been experiencing. But Maduro continues to press the same sort of plans that brought the nation to this state in the first place. (See Proverbs 12:15.)
Homemaker Maritza Vargas withdrew one of the new “sovereign bolivar” bills from her ATM machine on Tuesday. “I still don’t understand it very well,” she says of the five bolivar bill. Many Venezuelans used calculators and conversion charts to try to figure out what their purchasing power was with the revised-value bills.
Oil-producing Venezuela was once among Latin America's most prosperous nations. But a fall in oil prices accompanied by corruption and mismanagement under two decades of socialist rule left the economy in a historic crisis. Inflation this year could top one million percent, according to economists at the International Monetary Fund.
Maduro’s required pay wage increase goes into effect on September 1. Business owners worry they will not be able to meet the rate increases without drastically raising prices—which will in turn reduce customer ability to pay for products and services.
(AP Photo: A woman shows new Venezuelan bank notes she withdrew from an ATM on Tuesday.)
