Venezuela: Digital currency, Maduro's risky promise to save the Venezuelan economy

On his wish list for the year that begins, Nicolás Maduro has asked to turn the Venezuelan economy into the first 100 percent digital on the planet. The announcement was made in an interview with the Telesur channel, a few days before the new National Assembly, with a Chavista majority, took office, although it is not recognized by the international community, at the local level it allows the ruling party to retake the power of the the only state body still in the hands of the opposition.

He said, we are going, this year 2021, towards a deeper, expanding digital economy. I have set the goal: one hundred percent digital economy, that everyone has their payment methods by debit and credit card and added to his to-do list that cash disappears altogether, starting with bolivars, which are less and less valuable.

The president's plan has no successful precedents in the world, and to present it he resorted to a recurring strategy: accuse other countries of their hyperinflation problems, which have devalued their currency by 99 percent in the last three years and which would have skyrocketed. 5,790 percent in the last 12 months, according to the Bloomberg news agency.

He said, they have a war against our physical currency, he accusing the economic sanctions imposed by the United States and the fall in the price of oil of their evils.. But it is precisely the US dollar that has allowed a solution to Venezuelans who, according to the Government, carry out 18.6 percent of all transactions in dollars, 77.3 percent in bolivars with debit cards and 3.4 percent with bolivar banknotes. Unofficial sources put the figure of cash payments with dollars in Venezuela at more than 65 percent.

In a rather unusual move, the president also announced that he will allow banks to open accounts in foreign currency to pay for goods and services with them, an offer that has been operating since 2019, but in a very reduced way, since there is no compensation system that guarantees transactions in dollars. He also assured that he will create formulas to carry out transactions with checking and savings accounts in dollars. This last measure could mean the dollarization of the Venezuelan economy, which Maduro rejected in his public appearance in early January. Venezuela has its currency and we are going to defend it, he denying a formal dollarization of the economy.

The Venezuelan government's commitment is to strengthen the petro, its digital currency, launched in 2017 and which it expects to gain more strength in 2021. The petro, which would be backed by oil, gas, gold and diamonds, is also the solution offered by the ruling party so that digitization is not in foreign currency and the poorest Venezuelans have access to currency. In recent months, they even created the PetroApp application, to save and use the petro, and that allows it to be converted into bolivars or dollars, although what Chavismo hopes is that it be used in digital transactions in such a way that the bill gradually disappears.

Venezuela has in its favor to be developing legislation that would allow the digitization of its economy with legal guarantees. It also favors that online shopping is now easier and more familiar due to the pandemic . However, the poverty rate, which reached a painful 96 percent, and the lack of internet connectivity will make the task not easy for Maduro. You run the risk that your wish list for 2021, financially at least, will be put on hold.