Venezuelan President Nicolas Maduro calls the greenback a “safety valve” for his country and says that the dollars can help his government to overcome the crisis caused by the U.S. sanctions. What would it mean, explained in the material DW.
Dollarization is a change of the legislative framework in the monetary area, that is the last possible exit in a situation when all other solutions don’t work any more (nuclear option), told Bloomberg an expert on Latin America IEC Margolis. This is one reason why the dollar is the official currency in only a little more than three dozen countries, of which only three are located in Latin America. Ecuador, El Salvador and Panama officially moved US money by abandoning its national currency.
For Venezuela time to abandon national currencies in favor of the US dollar has not come yet, said economist Luis Vicente Leon, Director of market research company from Caracas Datanalysis. According to his calculations, despite the fact that Bolivar due to hyperinflation is extremely weak in October 2019 “only” 54 percent of all transactions for payment of goods and services was done in Venezuela with the use of foreign currency.
However, in comparison with the period preceding economic crisis in 2012, today the use of foreign currency in the turnover of goods and services in Venezuela increased tenfold. Not only in Venezuela but also in most other countries in the region are the people who can afford it, buy US dollars to protect themselves from inflation.
Still, the statement Maduro that due to the transition to the dollar, the situation of Venezuelans will improve significantly, and the economic crisis will be overcome, more than controversial. Because the indicators of the national economy of Venezuela is forced to be terrified. Head of the Latin American direction of the International monetary Fonds (IMF) Alejandro Werner believes that the economic and humanitarian crisis in Venezuela continues to deteriorate.
“Presumably, the real GDP in 2019 would be reduced by 35 percent, and its total decrease from 2013 will be more than 60 percent,” he says. In other words: in 2013 the volume of national economy of Venezuela has fallen by more than half. It is expected that the depreciation of the Bolivar, which this year has lost about 90 percent of its value, will continue. According to IMF forecasts, the inflation component of this year 200 thousand per cent, in 2020 will be equal to 500 thousand per cent.
Recently, Maduro said that the Bolivar will remain the official currency.
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