Venezuelan society has been in one of the worst crises in its history since the Chavista era began to exercise power, which peaked in early 2013, with a critical situation at all levels that affects the country with levels of unemployment, Corruption, migration and devaluation at a historical level.
In fact, hyperinflation, which started in November 2017 and still affects the country’s economy, is already considered the worst in all of American history. To put the figures into context: the cumulative inflation since President Maduro’s election victory in April 2013 already exceeded 5 billion percent in March 2020.
As part of the Venezuelan government’s desperate measures to control the destroyed economy, President Maduro presented an adjustment plan that highlighted the creation of the petro cryptocurrency.
The popularity of cryptocurrencies in this region of the western hemisphere is no secret to anyone, as cryptocurrencies like Bitcoin, Ethereum and Dash are widely used in different countries, including Venezuela. The investment opportunities that cryptocurrencies offer are becoming an attraction for Latin American users who have suffered from rounds of inflation throughout their history.
Inflation in Venezuela does not stop growing, so it is easy to conclude that the program announced in August 2018 could not stabilize the economy or at least reduce the impact of the Venezuela crisis.
Regardless of whether the government is right to accuse international actors of the situation in the country or not, it is undeniable that wages will continue to fall while prices rise uncontrollably. Therefore, the mandatory question about the impact of the petro on the Venezuelan economy seems to leave more doubt than satisfaction.
1.- Anchored in Petro
The first measure to anchor the minimum wage in sovereign Bolivarians «the legal tender»For the cryptocurrency Petro (PTR), a few months later it doesn’t make sense for the same government.
In theory, the average PTR under this decree, according to the official wealth calculator, would be about a little over five million bolivars, and this amount should be the monthly salary that every worker in the oil country earns.
In practice, however, the reality is different. According to the latest Official Gazette No. 6,532 on adjusting wages in Venezuela, which the Maduro government decided on Monday, April 27, 2020, the minimum wage per worker is only 400,000 Bs (~ USD 2) per month.
At Petros, the equivalent of the new minimum wage would only be PTR 0.0398, a -92.04% the measure President Maduro implemented in his official speech in 2018.
2.- Isolation and international rejection
One of the main problems the Venezuelan government has had with the Maduro government in recent years has been the large number of international sanctions that its chief officials and state oil company PDVSA face for washing assets and money. of illegal activities
With this in mind, the initiative to use the Petro as a means of payment for international commitments has been rejected by these countries, including those who claim to be friends of the “revolution”. The most emblematic case was that in Cuba and India, which do not accept the petro cryptocurrency as a medium of exchange for the sale of Venezuelan crude even at lucrative discount rates.
Add to this the recent international sanctions against high government officials for money laundering and drug trafficking, according to the Trump administration, in which the superintendent of cryptoassets in Venezuela and the person responsible for the petro in the country are accused of using the cryptocurrency for the country by the diversion of funds and the disguise of illegal dollars, the weaknesses at international level are even greater for the Maduro project.
3.- No real benefit
Apart from the sanctions and the impossibility of paying fair wages with the Venezuelan cryptocurrency, the real problem for Petro in the domestic economy is the impossibility of using it, mainly due to the lack of transparency about who controls it and the lack of trust, which in turn creates.
Cryptocurrencies are based on decentralization, which in turn creates trust. Bitcoin and Ethereum are valuable because they have confidence and transparency in their technology to name the most exemplary cases in the ecosystem. Every asset has a trustworthiness, and its usefulness shows this.
The Venezuelan case, although it was branded as ” Cryptocurrency‘does not meet these essential parameters in order to generate profit. Although the petro has been ordered by the Latin American country’s national government as a means of payment for government services such as notarial, passport and tax payments, the reality is between the social divide in a completely poor country and distrust of government proposals unlike other cryptocurrencies like Bitcoin is not allowed to gain a foothold in Venezuelans.
All you have to do is go to a notary and state that you pay with the cryptocurrency to see the “official” rejection of the workers present. In addition to the vicissitudes of preserving it, since it is issued in practice, additional government value added security is used to finance public spending.
If we weigh the pros and cons of implementing the petro in the Venezuelan economy, we see that the disadvantages have more space in the short period of their implementation and, more importantly, have not contributed to the country’s economic recovery.
On the contrary, as many have warned, the government-proposed cryptocurrency was used as a system of social control and temporary funding of its internal debt rather than to stimulate an economy destroyed by public mismanagement, the EU’s original goal that was proposed in its implementation.
The views and opinions expressed here are solely those of the author and do not necessarily reflect Cointelegraph’s views. Every step of investment and trading involves risks. You have to do your own research when making a decision.