Washington and legacy media are in a tizzy about Venezuela reportedly thwarting international sanctions by way of a dreaded state-backed cryptocurrency. A closer look reveals several stumbling blocks for the Bolivarian Republic: nonexistent reserves, hyperinflation, centralization, and the impossibility of actual redemption. The attempt will fail, if it’s ever rolled out, adding woes to a region plagued by years of monetary failure.
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Venezuela’s Desperation Leads to Crypto
Rice University’s Francisco Monaldi put it succinctly to Foreign Policy, “The idea that it is a currency backed by reserves is pure fiction. So you are left with a currency issued by a country in hyperinflation and in default,” dismissing out of hand the Bolivarian Republic of Venezuela’s attempt at a state-backed cryptocurrency, the Petromoneda (Petro).
Geographically, Venezuela is the envy of most countries. Sitting atop South America’s bulbous north, it opens to a natural seaport and is bordered by the continent’s largest, most successful economy, Brazil. Natural resources abound. None of that seems to matter at the moment, as the International Monetary Fund (IMF) projects 2018 the year Venezuela reaches 13,000% inflation. Half of its economy has vanished as it approaches a third annual double digit contraction. UNICEF warns of a growing child malnutrition crisis, suggesting this might be a generational problem for some time. There are tales of daily horrors, and they’re mounting.