Sunday, February 16, 2020

Banks Besieged As Venezuela Pulls 100 Bolivar Bills

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Black market spivs and organised crime gangs are the target of pulling millions of currency notes out of circulation in Venezuela.

With inflation so high that the government has stopped recording the statistics, a 100 bolivar note is worth a few US cents on the black market in Caracas and other cities across the economic stricken South American state.

Since President Nicolas Maduro announced the withdrawal of the notes and the closing of borders with neighbouring Colombia to stop black market traders, banks have been under siege from thousands of people clutching bundles of paper money in bags.

But warning that the currency exchange offering notes with less than 100 bolivar face values for the old money, crime barons and black marketers will not be able to wash lorry loads of cash through banks.

Thousands on the streets

“People arriving with trucks, carts or other irrational amounts of money won’t be able to exchange the notes,” said a central bank spokesman.

The 100 bolivar bills represent around 60% of the currency in circulation in Venezuela, and switching to other notes has brought thousands of people out on to the streets to try and preserve their savings.

Indian Prime Minister Modi recently instigated a similar move to swap higher denomination rupee notes for those of a low face value.

India has also seen a flood of savers overwhelm banks for days on end, but Modi’s aim to flush out corrupt officials and tax evaders has led to them paying others to take smaller amounts of cash to the banks to exchange.

Pledge no one will lose savings

In Venezuela, the central bank has pledged no one will lose their savings if they can explain how they gathered the cash they are attempting to exchange.

“Other people besides criminals have been hoarding money and there is no reason not to respect that they have saved if they can show that the money came from a legitimate source,” said the central bank spokesman.

The Venezuela government has faced annual inflation of more than 100% for several years, but refused to devalue the bolivar or take other action. Instead price controls were imposed that created an opportunity for criminals to make money.

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