Venezuela Relies on Petro to Revive its Economy
“Growth is never by mere chance; it is the result of forces working together.”
— James Cash Penney
Entrepreneur, businessman, and founder of J.C. Penney
My fiancée wants to take our honeymoon to a country in South America. I’m not big on traveling, but hey, “happy wife, happy life,” right?
To that end, I began researching South American countries.
Eventually, I got to Venezuela, a socialist country. The ball and chain said no to a honeymoon there, but I was already in research mode and continued reading...
Venezuela’s a country that relies heavily on petroleum. When oil prices crashed in the 1980s, Venezuela suffered. People lost wages and jobs, and consumer price inflation rose over 80%. And although Venezuela’s GDP increased a little in 1990 and 1991, unemployment was still high and wages remained low.
Venezuela never got a break. The country remained reliant on oil, and combined with a broken government, inflation reached 100% in the mid-1990s. The country also experienced a terrible banking crisis in 1994.
During the first few years of Hugo Chávez’s time in office, from 1999 to 2001, oil prices rose and the Venezuelan president shifted the country’s policies in a socialist democratic direction, which made the South American country even more reliant on oil.
From 2002 on, Venezuela continued to experience a downward recession, and by Chávez’s death in 2013, the country ranked #1 on the misery index.
Venezuela’s economy is still in the gutter, with its currency, the bolívar, being virtually obsolete. Inflation in the country is said to now be over 4,000%, with prices doubling each month.
For instance, the price for a cup of coffee has inflated over 700%.
Amongst the countries belonging to the United Nations, Venezuela was ranked 37th by GDP in 2017. Its GDP has shrunk over 10% continuously for the past three years alone.
Unemployment is over 30%, and over 85% of Venezuelan citizens live under the poverty line. As of this year, Venezuela has a debt over 34% of its GDP.
The country is currently in default, unable to pay its debts.
As dim as the situation looks, it seems as if Venezuela’s government has a bright idea to revitalize its economy... and it involves cryptocurrency.
This week, I’ll detail what the Venezuelan government has planned for its economy and what the effects will be.
What’s Going On?
Venezuela's Constituent National Assembly has recently approved a bill that’s intended to put Venezuela back on its feet. The bill was proposed by Venezuelan president Nicolás Maduro.
Amongst the several provisions and over 60 articles, the bill approves cryptocurrencies to be used for everyday transactions. More importantly, the bill allows for Petro to be used commercially.
Petro is a Venezuelan cryptocurrency that’s backed by oil, the country’s bread and butter.
Venezuelan citizens are able to purchase Petro in two different ways. They can purchase the cryptocurrency in a public office or on the government’s official website.
Google suspended the Petro digital wallet back in October.
The approved bill also amends Venezuela’s anti-money laundering laws, aiming to promote investment in the country.
The Venezuelan government hopes using Petro for conducting business will help revitalize the country’s troubled economy and alleviate its reliance on the United States.
The United States is Venezuela’s biggest export and import partner. Despite that, the two countries are on shaky terms. American businesses and diplomats have been expelled from Venezuela, and the United States has ordered sanctions against the South American country before.
Bolívar’s governor, Justo Noguera, had something to say on Venezuela’s economic dependency on the U.S. According to him, the Petro “will guarantee the operations of our companies, against the economic blockade that the United States intends to implement against Venezuela.”
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Help Is on the Way!
It’s not just the Venezuelan government and Petro working together to grow the country’s economy; two big boys in the crypto industry are also lending a hand.
AirTM, a Mexican wallet service, vowed to collect $1 million USD and issue it to 100,000 of its Venezuelan users on Giving Tuesday, the Tuesday following Black Friday.
That gives each recipient $10. I don’t think $10 per person sounds that great. Actually, it sounds pretty bad. I mean, how far can you make $10 stretch?
Well, in Venezuela, $10 can actually take you pretty far. Over in Venezuela, you could get over a week’s worth of food, weeks of rent, or a month’s supply of medicine with just $10.
The company responsible for the cryptocurrency Zcash has pledged a “sizeable” donation to the effort.
What This Means
With the Petro coin, Venezuela will be able to promote economic exchange between other countries. There are already plans set in motion for Petro’s use.
First, Venezuelan businesses will now be able to use the cryptocurrency commercially. Specifically, there will be Petro payments to Roraima, a Brazilian state near the border, to purchase goods and supplies.
Second, the Petro coin will be exchanged with companies located in Ciudad Guayana, a Venezuelan city, for extra supplies and metals such as aluminum, iron, and steel.
Now, Petro isn’t meant to replace Venezuela’s sovereign bolívar. Rather, its purpose is to “support consolidation and increase [the bolívar’s] purchasing power,” says Gerson Hernandez, a member of the Commission of Diversified and Productive Economy.
This situation with Venezuela is very compelling because the country’s dependency on cryptocurrencies is all because its own currency is failing and the economy is in shambles. Venezuela is showing us that we're now entering a stage where countries will lean on cryptocurrencies to solve economic crises.
Going back to James Cash Penney’s quote, Venezuela’s economy is in need of growth — badly. With the forces working together being Nicolás Maduro, the Petro coin, AirTM, and Zcash, a healthy, globally inclusive economy for the country is certainly possible.
The more you know,
John Butler, Jr.
Contributing Editor, The Token Authority