Confusion reigns as Venezuela braces for release of new banknotes

The new Venezuelan currency will be called the sovereign bolivar — to distinguish from the current, and ironically named strong bolivar, above. (AFP)
Updated 20 August 2018
0

Confusion reigns as Venezuela braces for release of new banknotes

  • Caracas is issuing new banknotes after lopping five zeroes off the crippled bolivar
  • The new currency will be anchored to the country’s widely discredited cryptocurrency, the petro

CARACAS: Beleaguered Venezuelans braced Monday for the rollout of President Nicolas Maduro’s radical new plan to curb the spiraling hyperinflation that has thrown their oil-rich, cash-poor nation into turmoil.
Caracas is issuing new banknotes after lopping five zeroes off the crippled bolivar, casting a pall of uncertainty over businesses and consumers across the country.
“There will be a lot of confusion in the next few days, for consumers and the private sector,” said the director of the Ecoanalitica consultancy, Asdrubal Oliveros.
“It’s a chaotic scenario.”
Other measures — revealed by Maduro in a speech to the nation late Friday — include a massive minimum wage hike, the fifth so far this year.
As it stands, the monthly minimum wage — devastated by inflation and the aggressive devaluation of the bolivar — is still not enough to buy a kilogram (2.2 pounds) of meat.
The embattled Maduro, a former bus driver and union leader, said the country needed to show “fiscal discipline” and stop the excessive money printing of recent years.
But economists say the radical overhaul could only make matters worse.
In the capital Caracas, residents were skeptical about the new measures.
“Everything will stay the same, prices will continue to rise,” 39-year-old Bruno Choy, who runs a street food stand, said.
Angel Arias, a 67-year-old retiree, dubbed the new currency a “pure lie!”
Three of the country’s leading opposition groups — Primero Justicia, Voluntad Popular and Causa R — have rejected the reform plan and called for a day of protest on Tuesday.
The new currency, the sovereign bolivar — to distinguish from the current, and ironically named, strong bolivar — will be anchored to the country’s widely discredited cryptocurrency, the petro.
Each petro will be worth about $60, based on the price of a barrel of Venezuelan oil. In the new currency, that will be 3,600 sovereign bolivars — signaling a massive devaluation.
In turn, the minimum wage will be fixed at half a petro (1,800 sovereign bolivars). That is about $28 — more than 34 times the previous level of less than a dollar at the prevailing black market rate.
The socialist president also announced a curb on heavily subsidized fuel in a bid to prevent oil being smuggled to other countries.
Subsidies would only be available to citizens registering their vehicles for a “fatherland card,” which the opposition has decried as a mechanism to exert social control over opponents.
Fuel subsidies have cost Venezuela $10 billion since 2012, according to oil analyst Luis Oliveros, but without them, most people would not be able to buy fuel.
Oliveros also warned that the new bank notes will crumble “within a few months” if hyperinflation is not brought under control.
The International Monetary Fund predicts inflation will hit a staggering one million percent this year in Venezuela — now in a fourth year of recession, hamstrung by shortages of basic goods, and paralyzed public services.
“Don’t pay attention to naysayers,” Information Minister Jorge Rodriguez said, pushing back against criticism of the plan. “With oil income, with taxes and income from gasoline price hikes... we’ll be able to fund our program.”
Oil production accounts for 96 percent of Venezuela’s revenue — but that has slumped to a 30-year low of 1.4 million barrels a day, compared to its record high of 3.2 million 10 years ago.
Maduro’s predecessor Hugo Chavez stripped three zeroes off the bolivar in 2008, but that failed to prevent hyperinflation.


Crisis at India's Jet worsens as it grounds planes, faces strike

The debt-laden carrier has delayed payments to banks, suppliers, pilots and lessors. (Reuters)
Updated 20 min 58 sec ago
0

Crisis at India's Jet worsens as it grounds planes, faces strike

  • More than 20,000 people are employed in the company
  • The company had to stop more than 50% of their aircraft due to insufficient funds

MUMBAI: India's Jet Airways was fighting multiple crises Wednesday after grounding six planes, leaving it with only a third of its fleet flying, while pilots have threatened to walk out and a major shareholder is reportedly looking to offload its huge stake.

The problems at India's number-two carrier come as other airlines struggle to turn a profit despite the sector rapidly expanding in the country over recent years.

Jet, which employs more than 20,000 people, is gasping under debts of more than $1 billion and has now been forced to ground a total of 78 of its 119 aircraft after failing to pay lenders and aircraft lessors.

In a statement late Tuesday announcing its latest grounding, the firm it said it was "actively engaging" with lenders to secure fresh liquidity and wanted to "minimise disruption".

But with hundreds of customers left stranded, Jet's social media accounts have been flooded with often suddenly stranded passengers demanding information, new flight tickets and refunds.

"@jetairways We book our flights in advance so that we save on travel cost and you are sending cancellation (message) now?", read one irate tweet on Wednesday.

"I have sent a DM (direct message) regarding my ticket details. Please respond!", said Sachin Deshpande, according to his Twitter profile a design engineer.

Another, Ankit Maloo, wrote: "Received an email for all together cancellation of flight days before departure without any prior intimation or communication over phone!"

The firm is also facing pressure from its many pilots who have not been paid on time, with unions threatening they will walk off the job if salaries do not arrive soon.

"Pilots will stop flying jet planes from 1st April 2019 if the company does not disburse due salaries and take concrete decisions," a spokesperson for the National Aviator's Guild, a pilots union, told AFP.

India's aviation regulator on Tuesday warned Jet Airways to ensure that staffers facing stress are not forced to operate flights.

Meanwhile, Bloomberg reported that Etihad Airways of the United Arab Emirates has offered to sell its 24 percent stake in Jet to State Bank of India (SBI).

A collapse would deal a blow to Prime Minister Narendra Modi's pragmatic pro-business reputation ahead of elections starting on April 11.

India's passenger numbers have rocketed six-fold over the past decade with its middle-class taking advantage of better connectivity and cheaper flights.

The country's aviation sector is projected to become the world's third-largest by 2025.

But like other carries, Mumbai-based Jet has been badly hit by fluctuating global crude prices, a weak rupee and fierce competition from budget rivals.

Alarm bells for Jet first rang in August when it failed to report its quarterly earnings or pay its staff, including pilots, on time. It then later reported a loss of $85 million.

In February, it secured a $1.19 billion bailout from lenders including SBI to bridge a funding gap, but the crisis has since deepened.

"Jet Airways is rapidly reaching a point of no return and running out of assets to keep itself afloat," Devesh Agarwal, editor of the Bangalore Aviation website, told AFP.

"The only solution is equity expansion by diluting its stakes but Jet is just trying to cut losses and running out of options," Agarwal said.

Shares in Jet Airways were down more than five percent on Wednesday.