Venezuela’s beleaguered President Nicolas Maduro has carried out one of the greatest currency devaluations in history in a bid stablise the economy and stem the mass exodus which threatens to turn into a full-blow refugee crisis that will engulf the continent.
With the International Monetary Fund warning inflation could hit 1,000,000% this year, Caracas has devalued its currency by 96% and also begun issuing new banknotes after slashing five zeroes off the crippled bolivar.
This means that the official rate for the currency will go from about 285,000 per dollar to 6 million, a shock that officials have tried to partly offset by raising the minimum wage 3,500% to the equivalent of $30 a month.
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The new sovereign bolivar, named to distinguish it from the current strong bolivar, will be anchored to Venezuela's widely discredited cryptocurrency, the petro.
Each petro will be worth around $60 (£47), based on the price of a barrel of the country's oil.
Along with plans to increase the price of petrol, it forms part of Maduro’s promise of “a magic formula” to get his country back on track, although many are skeptical it will work.
Economists say the package of measures “is likely to accelerate hyperinflation rather than address its core economic troubles, like oil production plunging to levels last seen in 1947”, reports The Independent.
“It’s not clear how the shock measures announced by Maduro will sit with one of his key allies: the military” who have been handed the keys to several key ministries says the Financial Post.
“Clearly this will hit Maduro’s popularity, but power is being sustained with bullets and not with votes,” Moises Naim, a fellow at the Carnegie Endowment and a former minister in Venezuela, said from Washington. “As long as the military continues to have access to lucrative businesses it will continue to grant support to the government.”
The measures could also have wider ramifications outside Venezuela.
CNN reports that the mass exodus of citizens fleeing the economic and humanitarian crisis is ratcheting up tensions in neighbouring countries such as Peru, Ecuador and Brazil.
On Saturday, a mob of Brazilians attacked a group of Venezuelans in a border city and destroyed a migrant camp, prompting President Michel Temer to hold an emergency meeting on Sunday as regional tensions flared over the numbers fleeing Venezuela.
In Ecuador, a new rule came into effect over the week requiring Venezuelan citizens entering the country to present a valid passport.
The UN High Commissioner for Refugees (UNHCR) says more than half a million Venezuelans have crossed into Ecuador via Colombia since the start of the year and that the number is accelerating with some 30,000 entering in the first week of August alone, prompting the government to declare a state of emergency.
“The exodus of Venezuelans from the country is one of Latin America's largest mass-population movements in history,” UNHCR spokesman William Spindler said in a statement. “Many of the Venezuelans are moving on foot, in an odyssey of days and even weeks in precarious conditions.”
