By 2014 the premises of a complex political and economic crisis were formed in the Latin American state of Venezuela and only a few years later the country's economy fell apart. The number of these pieces is quite large and the proof of this is the fact that Venezuela of 2016-2018 is often compared to Germany in 1921-1923, which is one of the most famous examples of hyperinflation in modern history. Therefore, according to the IMF, inflation in Venezuela can reach the 1,000,000% index. However, as often happens, millions of people support percentages, indices and economic terms and these people are not happy with the free subway, they cut their hours of work and millions in their pockets.
Today The Coin Shark will talk about the economy in Venezuela, the serious economic crisis and the efforts to overcome it, including the issue of a state cryptocurrency called Petro.
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- How did it start?
- What is the situation today?
- What does this have to do with cryptocurrency?  What is Petro?
- Will the cryptocurrency help Venezuelan economy?
1. How did it start?
In 2013 the president of Venezuela Hugo Rafael Chavez died, he has governed the country since 1999. The winner of the upcoming elections was Chavez's arms mate and current president Nicolas Maduro Moros. The economic problems in Venezuela depend significantly already in 2014. It is an open secret that the Latin American state is one of the main oil exporters and the country's economy depends directly on the market price of black things. Thus, for example, in 1973-1974, when oil prices on the international market grew significantly, Venezuela's export revenue increased by 400%. He gave the government the opportunity to implement plans on agriculture, energy and the development of heavy industry. In connection with the slide in oil prices in 2014-2016, the effect was inversely related to the previous one: the economic crisis has increased, GDP has started to decline, the national currency has continued to decline and people have started to suffer from food shortages.
The deep crisis started in the energy sector and then spread to the whole economy. Returning to the peak of the energy crisis, employees worked only two days a week to allow the country to save electricity. In the summer of 2018, the citizens of the capital Caracas began to use the underground for free, since the state company that printed the tickets had no money to buy imported materials.
2. What is the situation today?
This is just one example of how the government seeks to save currency resources. In the interview at the Deutsche Welle a Venezuelan economist Pablo Rafael Gonzalez mentioned that the strict currency control implemented by the government set all prices in the assessment once conducted.
He believes that led to the bankruptcy that we can now observe: 1 dollar costs 2.5 million bolivars. It is 17 times higher than the official exchange rate. The Venezuelan salary is 5.5 million bolivars. A pound of meat costs 10 million. According to the expert, the minimum price for bread on the island's largest island (Isla Margarita) is 1 million and 400 thousand bolivars.
May 2018 the country where the presidential elections took place led to the expected victory of the current president, Maduro. The leaders of the G7, as well as some Latin American countries, did not recognize the elections. In Venezuela it has also amplified the political crisis and led to new clashes between protesters and the government. The active protest movement began in 2014 and, as a result, supporters of the ruling party lost the parliamentary elections in 2015. The situation is still extreme and some media have already started to reiterate their articles as Venezuela is on 39; edge of the civil war. In fact, these conditions do not allow us to talk about a possible economic recovery. According to the International Monetary Fund, the Venezuelan economy has shrunk by 50% within five years of the crisis, which is the most significant economic fall in the world in the last 60 years.
3. What does this have to do with cryptocurrency?
20 August 2018 The Venezuelan government has issued a huge denomination of the national currency: it has cut five "zeros" from bolivar into pieces. At the same time, bolivar had to be anchored to the state cryptocurrency called Petro .
Maduro assured that Petro "will help the country to increase its monetary sovereignty" and overcome the economic blockade, first of all the US sanctions. According to Maduro, cryptocurrency could help to process transactions to find new sources of budget. Maduro announced the cryptocurrency issue plan in December 2017.
In March 2018, Maduro announced that Petro's pre-sale has attracted more than $ 5 billion, a local media reported. There was not much excitement about the issue of this cryptocurrency in the world, the press agencies have referred to it as a scam and Donald Trump issued an order prohibiting US citizens from buying or using Petro .
4. What is Petro?
The idea of a strong commodity-backed currency belonged to the former president Hugo Chaves, reports Al Jazeera, as referring to the white paper published by the government. Because the national currency is anchored in Petro, it aims to overcome the sanctions adopted by the United States. The country has allocated 5 billion barrels of oil to support its cryptocurrency. On May 23, Maduro announced that all citizens and companies could buy Petro in exchange for yuan, ruble, Turkish lira and euro, as well as Bitcoin, Ethereum, NEM.
A part of the cryptocurrency community is rather skeptical of Petro and says that this is a false cryptocurrency controlled by the government and subject to corruption. Wired writes that the financial system of Venezuela – the currency supported by cryptocurrency supported by oil – is actually scam on top of another fraud.
5. Will the cryptocurrency help Venezuelan economy?
The government claims that the investments attracted by Petro, would help the country to pay part of its debt. Foreign Trade Minister Jose Vielma Mora has claimed that some Brazilian companies have agreed to export food products to Venezuela using Petro, although there were no official comments from Brazilia. It is clear that, given the serious systemic economic problems in Venezuela (including problems related to the lack of economic management), the serious political and social crisis, the issue of state cryptocurrency will hardly change the situation to improve. At the same time, the true economic effect of the recently launched cryptocurrency is probably still to be determined.
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