Venezuela’s currency devaluation spreads confusion and closes shops

Shuttered stores, empty streets, confusion over the cost of basic items: the day after President Nicolas Maduro introduced measures to invigorate Venezuela's economy found the country in turmoil and its population afraid his "programme for recovery, growth and economic prosperity" would lead it deeper into depression.

The measures included increasing taxes, raising the price of petrol for some buyers who do not register with the government, and slashing five zeros from the devalued currency, the bolívar, which was renamed the sovereign bolívar.

The currency change left many consumers – and vendors – bewildered. On Monday, the day the new economic plan was rolled out, streets were quiet and most shops were closed, as Maduro had decreed a national holiday. But most remained closed on Tuesday as shopkeepers tried to understand how to reset prices in the new currency and buyers struggled to make the conversion.

Rosa Peña walked into a small shoe shop that was open in the low-income neighbourhood of Petare, in Caracas, to look for flip-flops for her granddaughter. She brought a mobile phone, which she borrowed from her daughter, to calculate what she would pay for the shoes in the new currency and to compare that with what she would have paid in the old, familiar one.

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Even with the help of a conversion app for the two currencies, she couldn’t grasp what the new price meant. “I can’t even understand these numbers,” Peña said, holding up the phone. “My daughter gave me this, and she showed me how to use it, but we can’t understand when we convert big amounts.”

Minimum wage increase

The new plan also introduced an increase in the minimum wage of more than 3,000 per cent, which many business owners said they could not afford, leaving employees afraid for their jobs.

“We are waiting for the store owner to tell us what he is going to do with us,” said Marietta Guerrero, the manager of one of the few shops that opened in Caracas on Tuesday. As she wrote receipts with a black marker, waiting for the cash machines to be adjusted to the new currency, she explained that after only one month at her job she is scared she might get fired.

“No one here can afford an employee,” she said, before helping a customer who could not figure out if she had enough of the new currency to make a purchase.

Venezuela faces the worst economic crisis since 1999, when Hugo Chàvez came to power. Inflation topped 32,000 per cent last week. The country has the largest oil reserves in the world, but mismanagement has pushed the state oil company, PDVSA, into bankruptcy as oil production plummeted to the lowest level in decades. This has led to widespread hunger, crippling shortages of medicine and other essentials, and an outflow of more than a million people in recent years.

While Maduro reassured the population, telling them in a live Facebook address on Sunday, “We are beginning the process of recovery in the coming days, weeks and months,” opposition parties called for a strike.

Chaos

It was not clear on Tuesday how many businesses were closed in response to the opposition’s initiative and how many were waiting for clarity on the meaning of the new rules. Andrés Velásquez, an opposition leader, said the question of why the population was staying home was not relevant. The chaos created by the new measures was evident, he said.

“The answer is there for the world to see,” he said. For Henkel García, a Venezuelan economist, Maduro’s plan has brought more questions than answers so far. “People are cautious,” he said. “Most businesses did not open not only because of the strike but also because they’re waiting for more information to see if they are going to keep operating or not.”

Venezuelans who could not stay home did what they could to cope with their new reality. In a PDVSA gas station, René Manzanilla taught his co-workers the difference between one currency and the other. “Remember, you can’t receive 500-bolívar bills, those are not going to work,” he said.

“But how much is 500?” another worker asked.

Manzanilla was silent for a moment.

“Wait,” he said, “I am confused. Let’s start over.” – New York Times