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Latin American Economy & Business - December 2016 (ISSN 1741-7430)

Venezuela: Monetary chaos

An untimely decision to withdraw the largest bolivar note from circulation (BsF100) in an overly-ambitious three-day period has sparked monetary chaos in Venezuela. President Nicolás Maduro has pledged to introduce new, higher denomination notes, but in the interim, there is a severe nationwide cash shortage. It is difficult to identify the government’s logic for its move, since it is damaging pre-Christmas retail sales, undermining the remaining vestiges of confidence in the local currency, fuelling more inflation and destabilising the financial sector. And in political terms, the botched decision will further erode Maduro’s standing.

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