Bolivarian Republic of Venezuela to get new currency

[Nightwing]

Chavez coins new currency for Venezuela

 

By Jorge Rueda

January 1, 2008

 

CARACAS, Venezuela — Venezuela is introducing a new currency with the new year, hoping to fight inflation by lopping off three zeros from denominations.

 

President Hugo Chavez's government says the new currency — dubbed the "strong bolivar" — will make daily transactions easier, contain rising prices and strengthen the economy.

 

"We're ending a historical cycle of ... instability in prices," Finance Minister Rodrigo Cabezas said yesterday, adding that the change aims to "recover a bolivar that has significant buying capacity."

 

Prices have risen as Mr. Chavez has pumped more of the country's oil income into social programs, reinforcing his support among the poor and helping to drive 8.4 percent economic growth in 2007.

 

The Central Bank is promoting the new monetary unit with an ad campaign and the slogan: "A strong economy, a strong bolivar, a strong country."

 

Officials, however, have yet to articulate their anti-inflationary measures.

 

Some Venezuelan critics, meanwhile, have dubbed the new currency the "weak bolivar," noting that its predecessor, the bolivar, has seen its purchasing power suffer in an economy where inflation ran about 20 percent in 2007 — the highest in Latin America.

 

Venezuelan economist and pollster Luis Vicente Leon said that although the new currency may provide "the perception of stability" for some, it is largely a "cosmetic change."

 

Government officials say the change is overdue to bring Venezuelan denominations into line with those of other countries in the region. Instead of denominations in the thousands, the largest new Venezuelan note will be 100 strong bolivars.

 

"It was necessary to leave behind the consequences of a history of high inflation," Central Bank president Gaston Parra said in a televised year-end speech. He said officials aim "to reinforce confidence in the monetary symbol."

 

The new money was distributed to banks and automated teller machines nationwide ahead of today's introduction and will be phased in during the next six months. Venezuelans will be able to use both old and new bolivars during the transition.

 

Venezuela has had a fixed exchange rate since February 2003, when Mr. Chavez imposed currency and price controls. The government said it is not considering a devaluation any time soon.

 

But while the strong bolivar's official exchange rate will be fixed as 2.15 to $1, the black-market rate has hovered at about 5.60 to $1 recently.

 

Venezuela's currency has long been named after independence hero Simon Bolivar, who is pictured on the new 100 strong bolivar bill.

 

The new money is the latest in a series of changes to national symbols during Mr. Chavez's presidency. He also redesigned the national seal and flag and renamed the country the Bolivarian Republic of Venezuela.

 

With the new currency, the government also is resurrecting a 12.5-cent coin, called the "locha," which has not been used since the 1970s.

 

Meanwhile, Mr. Chavez granted amnesty yesterday to many opponents accused of supporting a failed 2002 coup that briefly drove him from power.

 

He said he signed an amnesty decree that also would pardon others accused of attempting to overthrow his government in recent years.

 

"It's a matter of turning the page," he said in a telephone call to state television on New Year's Eve. "We would like a country that moves toward peace."

 

Mr. Chavez was ousted by dissident military officers, but was returned to the presidency by loyalist generals within two days amid street protests by his supporters.

 

Taken from: http://washingtontimes.com/apps/pbcs.dll/a.../959520172/1001

[tabbs]

Images of the new coins are here:

 

http://www.reconversionbcv.org.ve/bsf/bsfimag.pdf (Coins and notes, PDF)

http://de.wikipedia.org/wiki/Bolívar_Fuerte#Die_M.C3.BCnzen (Images of the coins)

 

Also, Bloomberg has this interesting story focusing on the 12 1/2 c piece called "locha":

http://www.bloomberg.com/apps/news?pid=206...r=latin_america

 

Christian

[jtryka]

The most interesting part of the article is the reintroduction of the 12 1/2 cent coin, which seems a real throwback to the old 8-reales system in Latin America. I have an old Bolivar around here somewhere that contained 25g of 0.900 fine silver, which was equal to $1.00 in subsidiary coinage, but less than 1 standard US silver dollar (26.73g). I might want to get a set of these just for that 1-real coin!

[Scottishmoney]

The most interesting part of the article is the reintroduction of the 12 1/2 cent coin, which seems a real throwback to the old 8-reales system in Latin America. I have an old Bolivar around here somewhere that contained 25g of 0.900 fine silver, which was equal to $1.00 in subsidiary coinage, but less than 1 standard US silver dollar (26.73g). I might want to get a set of these just for that 1-real coin!

 

Maybe in his sulphurous nuttiness 'ol Hugo has a plan to sell these interesting coin denominations to los Yanquis? Unless a country dollarizes it's currency, like Panama, Ecuador or El Salvador, their currency always without fail loses value dramatically.

[jlueke]

Maybe in his sulphurous nuttiness 'ol Hugo has a plan to sell these interesting coin denominations to los Yanquis? Unless a country dollarizes it's currency, like Panama, Ecuador or El Salvador, their currency always without fail loses value dramatically.

The Rupee isn't dollarized and has been steady and gaining for years.

[Scottishmoney]

The Rupee isn't dollarized and has been steady and gaining for years.

 

I am referring to South American currencies, none of which have appreciated against the dollar for more than a blip. Just about all other currencies in the world, with the exception of countries like Zimbabwe and other nutcase led places, have currencies that have appreciated against the dollar lately. Doesn't bode well for the dollar, now that we are in the same boat as third world countries.

[jtryka]

And don't forget that Panama took about a 50% devaluation for it's peg to the dollar. In 1904, 1 balboa was equal to 50g 0.900 fine silver (though the largest coin minted was 50-centavos of 25g), but in gold it was equal to a gold dollar at 1.672g of 0.900 fine gold (though no gold balboas were ever issued!). The silver content was adjusted in 1931 to peg a balboa to a silver dollar at 26.73g 0.900 fine silver, and it's been tied to the dollar ever since.

[Drusus]

not a fan of the new coins, to much like the awful euro...but I like the bills, very nice.

[tabbs]

Guess the coins were not designed for people who are used to awfully verbose coinage. And that 12.5 centimos coin - well, it may be a reminder of better days, but I don't think it will be very useful for everyday transactions ...

 

Christian

[SMS]

Maybe in his sulphurous nuttiness 'ol Hugo has a plan to sell these interesting coin denominations to los Yanquis? Unless a country dollarizes it's currency, like Panama, Ecuador or El Salvador, their currency always without fail loses value dramatically.

 

That is something only time will tell. As of New Year's Eve, the Bolivar (VEB) rated on the exchange at roughly 4.663 pips against the USD. On the first, the Bolivar Fuerte (VEF) was exchanging at roughly 4657 pips (4.657 pips VEB) against the USD. So, upon introduction, the Bolivar fell 6 pips. At this current time in the second day of trading the currency, there has been no move. However, in the article, it is stated that Chavez had set a 2.5 VEF to 1.0 USD rate to his new currency. I take this to mean that he and his advisers expected the Bolivar to fall by as much as .657 pips VEB instead of the .006 pips VEB prior to converting to the VEF. The market outlook is more optimistic than Chavez' own because the current rate is 2.14 VEF to 1.0 USD instead of 2.5 VEF.

 

But, again, only time will tell how well the Bolivar Fuerte will do against the other world currencies.

[Scottishmoney]

He would have been wise to have pegged it to the price of crude oil, or gold. Both are at historic all time highs today.

[jlueke]

He would have been wise to have pegged it to the price of crude oil, or gold. Both are at historic all time highs today.

I agree that command economies are better off with hard money as opposed to fiat money.

[Scottishmoney]

The funny thing about Hugo Chavez being in power is that while he rails daily against the imperialistic USA, during his reign, trade betwixt Venezuela and the USA has increased dramatically, not only are we buying more Venezuelan oil, but they are buying lots more consumer goods, durable goods etc from the USA. It is one of the paradoxes of his being in power and counting GWB as a foe, but really Hugo just like his buddy Fidel would not be in power but for the USA. He banters all the time about a Yanqui invasion just like Fidel used to, in reality the USA will not invade Venezuela because frankly the country is not any remote threat. The guy is bombastic and fires up the right people with his speeches, but in reality he is not a clever man. He took a major hit with the defeat of the referendum back in November that would have made him president for life, and increased his powers. At least he did the right thing and conceded defeat finally.

 

As for the banknotes, I like them. They are colourful, unique. But the coins aside from the 12 1/2 Centavos do nothing for me, and that only does because of the unique denomination which is a throwback to one of Hugo's fond memories of his ghetto childhood.

[jlueke]

The funny thing about Hugo Chavez being in power is that while he rails daily against the imperialistic USA, during his reign, trade betwixt Venezuela and the USA has increased dramatically, not only are we buying more Venezuelan oil, but they are buying lots more consumer goods, durable goods etc from the USA. It is one of the paradoxes of his being in power and counting GWB as a foe, but really Hugo just like his buddy Fidel would not be in power but for the USA. He banters all the time about a Yanqui invasion just like Fidel used to, in reality the USA will not invade Venezuela because frankly the country is not any remote threat. The guy is bombastic and fires up the right people with his speeches, but in reality he is not a clever man. He took a major hit with the defeat of the referendum back in November that would have made him president for life, and increased his powers. At least he did the right thing and conceded defeat finally.

 

As for the banknotes, I like them. They are colourful, unique. But the coins aside from the 12 1/2 Centavos do nothing for me, and that only does because of the unique denomination which is a throwback to one of Hugo's fond memories of his ghetto childhood.

 

Hugo might well have an accident, invasion at this point isn't too likely. But don't underestimate the power of money to get it's way. The history of the Western hemisphere is quite thickly littered with Yanqui interference both direct and indirect.

[Drusus]

The US was probably conspiring to remove him...which is why he hates GW.

 

[Nightwing]

Images of the new coins are here:

 

http://www.reconversionbcv.org.ve/bsf/bsfimag.pdf (Coins and notes, PDF)

http://de.wikipedia.org/wiki/Bolívar_Fuerte#Die_M.C3.BCnzen (Images of the coins)

 

Also, Bloomberg has this interesting story focusing on the 12 1/2 c piece called "locha":

http://www.bloomberg.com/apps/news?pid=206...r=latin_america

 

Christian

 

Thanks for posting those!

 

The most interesting part of the article is the reintroduction of the 12 1/2 cent coin, which seems a real throwback to the old 8-reales system in Latin America. I have an old Bolivar around here somewhere that contained 25g of 0.900 fine silver, which was equal to $1.00 in subsidiary coinage, but less than 1 standard US silver dollar (26.73g). I might want to get a set of these just for that 1-real coin!

 

I think the 12 1/2 cent is unique as well, but the designs don't do anything for me.

 

not a fan of the new coins, to much like the awful euro...but I like the bills, very nice.

 

I agree.

[Scottishmoney]

The US was probably conspiring to remove him...which is why he hates GW.

 

 

 

The head is not big enough, remember he has an inflated sense of self esteem.

[tabbs]

He banters all the time about a Yanqui invasion just like Fidel used to, in reality the USA will not invade Venezuela because frankly the country is not any remote threat.

Well, the US has in the past found ways somewhere in between leaving other countries alone and invading them - see the support of the military coup and dictatorship in Chile in the 1970s for example. Chavez is a jerk (I loved Juan Carlos's "¿Por que no te callas?" comment ) but apparently still quite popular in parts of the society, and not only in Venezuela. As for the Bolivar Fuerte, I wonder how much sense such redenominations make in the middle of a high inflation phase. Had the annual inflation rate come down from 20 to 15 percent, chopping a few zeros off could help improving confidence. But it has pretty much been the other way round, with inflation being on the rise again. So maybe 1000 Bolivares Fuertes will become 1 Bolivar Más Fuerte in a few years ...

 

Christian

[Scottishmoney]

Well, the US has in the past found ways somewhere in between leaving other countries alone and invading them - see the support of the military coup and dictatorship in Chile in the 1970s for example. Chavez is a jerk (I loved Juan Carlos's "¿Por que no te callas?" comment

 

It has even become a ringtone here in the USA, while mine is in Spanish, it not the one I have on my phone. And the USA has a way of supporting right wing governments like those of Chile and Argentina. Hey they were not democratic, but they were not Commie either

 

But it has pretty much been the other way round, with inflation being on the rise again. So maybe 1000 Bolivares Fuertes will become 1 Bolivar Más Fuerte in a few years ...

 

Christian

 

Y tambien Bolivar muy más fuerte