Venezuela subtracts six zeros from currency, second overhaul in three years

CARACAS, Oct.1 (Reuters) – Venezuela on Friday launched its second monetary overhaul in three years by removing six zeros from the bolivar in response to hyperinflation, simplifying accounting but doing little to ease the South American nation’s economic crisis .

The plan aims to simplify accounting in businesses and banks, where systems can no longer handle huge numbers. Venezuela’s annual inflation is 1,743 percent, according to the Venezuelan Finance Observatory. The minimum wage is barely $ 2.50 a month.

“Honestly, I think the hyperinflation is too strong, it is already the third conversion,” said Alfredo Bohorquez, 55, a seller of drawings on a boulevard in eastern Caracas. “This one will last three or four years, maybe less.”

The government of President Nicolas Maduro in 2018 removed five zeros from the currency due to high prices. It came a decade after the late President Hugo Chavez subtracted three zeros from the bolivar with the promise of single-digit inflation, which has not been met.

The once prosperous OPEC country suffers from an economic crisis that has lasted for years and has resulted in millions of Venezuelans emigrating. Maduro’s socialist government blames US sanctions for the country’s woes, while critics blame interventionist macroeconomic policies.

The widespread adoption of the US dollar for business transactions in Venezuela will further dilute the relevance of the new regime. Cash bolivars in Venezuela are rarely used for routine purchases.

On Friday, many people were using cash dollars for their purchases at supermarkets, pharmacies and stores selling school supplies and uniforms, Reuters witnesses said. Banking systems were functioning normally after a planned outage lasting several hours early Friday morning as they converted to the new currency exchange system.

“The economic imbalances in the country are very acute and the zeros that are removed today will soon return,” said economist José Manuel Puente. “The conversion will have no impact in macroeconomic terms.”

Reporting by Vivian Sequera and Mayela Armas in Caracas Writing by Brian Ellsworth and Luc Cohen Editing by Rosalba O’Brien

Our standards: Thomson Reuters Trust Principles.

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