Paper Money

Venezuela recalls a worthless note and chaos results

India’s horrible November experience with a paper currency withdrawal provided no wisdom to the bureaucrats of Venezuela, who by all indications, have made their Indian counterparts look good by comparison. Venezuela’s recall and demonetization of its near-worthless 100-bolivar notes, worth 2 cents on the black market, was such a disaster that NBC News showed a film clip of people ripping them in half.

Venezuela’s problems are a self-inflicted consequence of top-down mismanagement and general incompetence. The official reason given for withdrawing the note was that half of the 6 billion notes in circulation were held abroad by criminal gangs, but President Nicolas Maduro also cited what he called “the revenge of Obama.” Maduro decided on Dec. 12 that 100-bolivar notes could be deposited in bank accounts only until Dec. 15 when a new series of six notes from 500- to 2,000-bolivar issues would be introduced. After that date, the old notes could be exchanged at the Central Bank of Venezuela until Dec. 29. They would become worthless the day after. On Dec. 15 the bank imposed restrictions on the export of currency to 35,400 bolivars by land and 54,162 bolivars by air. It was also acknowledged on that day that no one really knew when the last day to change the old notes was: The Central Bank’s “Official Advisory” said Dec. 25, the Official Gazette said Dec. 24, and the president of the Central Bank said Dec. 29.

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As of Dec. 16, none of the new bank notes had been released. On Dec. 18, the Latin-American Telesur television network said that Maduro blamed “international sabotage” and the U.S. Treasury Department for the delay in the delivery of the new currency from Sweden, and that the legal tender status of the 100-bolivar note was extended to Jan. 2, 2017. A first shipment of 272 crates of 50,000 500-bolivar bills finally arrived in Caracas on Dec. 19.

A Dec. 7 press release said that the new series would have multicolored fibers, ultraviolet recognition properties, watermarks, anti-scanning protection, microprinting, safety threads, aid for the visually impaired, and fluorescent and intaglio printing.

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