Venezuela eliminates 6 more zeros from its currency to save the bolivar

The Venezuelan government announced Thursday a new conversion of its currency, the third so far this century, with which it will remove six more zeros from the sovereign bolivar, which will be transformed into the digital bolivar, although it will continue to have banknotes and coins.

The new bolivar will come into effect on 1 October 2021 "by applying a monetary scale that removes six zeros from the national currency. That is to say, all monetary amounts and everything expressed in national currency will be divided by one million (1,000,000)," the Central Bank of Venezuela (BCV) said in a statement.

The sovereign bolivar, which was born in 2018 after a monetary reconversion that eliminated another five zeros from the currency, has almost entirely disappeared from the streets due to hyperinflation and devaluation.

Currently, 4,036,194.85 sovereign bolivars are exchanged for one dollar, according to the latest BCV report, while the highest denomination note is the one million.

The current currency replaced the bolivar fuerte, created in 2007 although it began circulating on 1 January 2008, which already meant the elimination of another three zeros from the Venezuelan currency, meaning that after 1 October the Venezuelan currency will have lost 14 zeros in 13 years.

The BCV assured that the current "change of monetary scale" is "based on the deepening and development of the digital economy" in Venezuela and considers it "a necessary historical milestone at a time when the country is starting on the road to economic recovery".

Despite this, it will feature one bolivar coins and banknotes of 5, 10, 20, 50 and 100 bolivars, all with the face of the liberator, digitally recreated in 2012, on the obverse and an allusion to the battle of Carabobo, key to independence, on the reverse.

"The introduction of the digital bolivar does not affect the value of the currency, that is, the bolivar will not be worth more or less, only that to facilitate its use a simpler monetary scale is being used," the information added.

Due to the devaluation of the current sovereign bolivar, banknotes had practically disappeared, since the largest denomination, the one million bolivar, is worth about 25 cents on the dollar and with it you can barely buy two city bus fares in Caracas.

If you want to pay in bolivars, most payments are made by card or automatic transfers through a platform called Pago móvil.

Given the weakness of the bolivar and its limited purchasing power, Venezuela is undergoing a process of transactional dollarisation, which means that the US currency is the main currency used for cash payments.

The new bolivar, although its creation is supported by the BCV in the digitalisation of the economy, will face a problem identical to that suffered by the sovereign: poor internet connection and constant power cuts.

Because of these problems, it is often impossible for citizens to make payments through platforms and even to use dataphones.

The announcement of this new digital bolivar was interpreted by the opposition as a sign of the "failure" of the economic policies of the government of Nicolás Maduro.

"They announce a new reconversion and the upcoming entry into force of the Digital Bolivar. 14 zeros less are not a recovery! They are the sign of the economic destruction of the regime", wrote on Twitter the two-time presidential candidate Henrique Capriles, who considered that the Venezuelan currency "is worth less and less".

For his part, Julio Borges, appointed by Juan Guaidó as commissioner for foreign relations, stressed that the new measure is "an unequivocal symptom of the failure of an economic policy".

In his opinion, "hyperinflation will continue to gallop and, in a few months, this new reconversion will end like the others, in failure".

"The solution is a macroeconomic stabilisation programme that allows for the recovery of production, the recovery of finances and the restoration of purchasing power," he said.

The director of Guaidó's office, Luis Somaza, added his voice to the criticism by considering that "removing six zeros from the currency again is a demonstration of the economic failure to which Maduro has subjected the country".

"This only translates into more inflation and greater poverty for our people. The only way to recover Venezuela is to get Maduro out of (the presidential palace of) Miraflores", he concluded.