Monday, 19 December 2016

Venezuela: Riots forces suspension of demonetization until Jan 2, 2017

Dec 19 2016 : The Times of India

Venezuelan President Nicolas Maduro suspended demonetization of the country's largest denomination bill, which has sparked unrest, until January 2. The surprise pulling out of the 100-bolivar note from circulation this week -before new larger bills were available -led to vast lines at banks, looting at scores of shops, anti-government protests and about four deaths.

Maduro blamed a “sabotage“ campaign by enemies abroad for the delayed arrival of three planes carrying the new 500-, 2,000 and 20,000-bolivar notes. “One plane, contracted was told in flight to change direction and go to another country ,“ he said.“There's another which was not given flyover permission.“

The 100-bolivar bills, officially out of use since Thurs day and worth just 4 US cents at the black market currency rate, can now be used until January 2. Many Venezuelans had found themselves without the means to pay for food, gasoline or Christmas preparations in a country already reeling from an economic crisis.

About 40% of Venezue lans do not have bank accounts. Adding to the chaos, Venezuela has the world's highest rate of inflation, which is set to hit 475% this year, meaning large bags of cash must be humped around to pay for basic items.

“We have a government utterly stupid and destructive in economic management, whose only goal is to keep power at whatever price,“ said opposition leader Julio Borges. Maduro had justified the demonetisation move as a way of strangling mafia on the frontier with Colombia. He has also closed border crossings with Colombia and Brazil until January 2.

My View:
Venezula was suffering from low oil prices and hyperinflation despite percapita GDP of $10,000+ and its currency has become worthless which warranted demonetization. However demonetization with out new bills to replace was monumental mistake that lead to chaos and people starving for food and supplies. Blaming external forces for failures is meaningless. By inept planning & implementation, demonetization has compounded the problems instead of solving any ills.

Maduro emulated Modi with demonetization surprise and with out replacement supplies and it boomeranged on his face. 

Indian exercised unusual patience in queues despite 100+ queue deaths so far despite cash supply situation not improving in 50 days. Past is no guarantee for future, Modi should remember and accelerate mitigation measures.

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