CARACAS— Venezuelans are rushing to the banks this week in a desperate attempt to protect their savings from the government’s latest spasm of reckless financial policymaking.
On Tuesday morning thousands of people across Venezuela played hooky from work to line-up outside banks and deposit bundles of cash into their savings accounts after the government gave everyone a 72-hour countdown to turn in all their 100 bolivar notes before they’re removed from circulation.
“I’ve been saving for so long, withdrawing money every week and for what? Nothing!” complained José Orozco, who was holding a backpack full of money as he stood in line.
The 100 bolivar note, the highest denomination of Venezuelan currency, is currently worth about 3 cents on the U.S. dollar. But Venezuela’s government announced on Sunday that it is removing the bills from circulating because they’re being purchased in bulk by “international mafia groups” that are allegedly trying to “overthrow” the struggling socialist government by hoarding money abroad and starving Venezuela of cash.
President Nicolas Maduro said that by making his country’s 100 bill illegal, he is “hitting back” against the mafia groups, who he claims have ties to the U.S. State Department, although he’s never offered any solid proof to back his claims.
“Compadres, you can keep your bills now in Cucuta (Colombia) and Germany,” Maduro gloated during a live TV appearance on Monday.
Maduro also closed Venezuela’s border with Colombia for three days, in a move designed to stop “the mafia groups” from bringing their crate loads of 100 bolivar bills back into Venezuela to deposit at banks.
“We will keep on hitting these mafias,” Maduro vowed.
But not many people believe Maduro’s narrative about withdrawing the currency to fight the mafia. Juan Nagel, a Venezuelan economics professor and co-founder of the Caracas Chronicles blog, described the government’s story as a “wacky” conspiracy theory.
“If the mafias wanted to attack the currency supply, why didn’t they buy (cheaper) lower denomination bills,” Nagel said. “And why didn’t the government withdraw those bills, too?”
Nagel, who teaches at the University of Los Andes in Chile, said a more likely reason that the 100 bolivar bills have come in short supply is because of Venezuela’s hyperinflation. For example, a simple lunch in Caracas right now currently costs around 5,000 bolivares, which means that if someone wants to pay for the meal in cash, they have to fork over a thick wad of 50 bills.
Trading $50 for regular expenses during a trip to Caracas looked something like this in October.
Economists say another likely reason for Venezuela’s cash shortages is that people are taking their increasingly worthless money to the border to trade it for dollars to buy essential goods. In Cucuta, a city on the Colombian border, hundreds of exchange houses buy bolivares from Venezuelans who cross into the neighboring country looking for shampoo, rice, flour and other goods that have become scarce in Venezuela thanks to the country´s rigid price controls.
Now the exchange houses have 72 hours to figure out what they are going to do with boxes full of 100 bolivar notes on the wrong side of a border that’s been closed by Venezuelan officials.
“This is an authoritarian measure. Another case of the government trampling our rights,” said Diego Olarte, a spokesman for Cucuta’s money changers.
Back in Caracas, people lined up outside banks carrying plastic bags and backpacks stuffed with 100 bolivar bills to deposit into their accounts and convert into digital savings before the clock ticks down to zero.
Arlenis Perez, a moto taxi driver, said she got to the bank at dawn only to find a long queue had formed. “This is a disgrace,” she said as she stood on line under the hot tropical sun.
But Perez is one of the lucky ones. Nearly one-third of Venezuelans don’t have a bank account. Many people who work mostly in the informal economy now have to find other ways to exchange their stacks of bills before the deadline. It’s no easy task. Some shops have stopped accepting the 100 bolivar notes, and nobody wants to be left holding the hot potato when the music stops.
“I might have to ask a friend to deposit some of my money into her account,” said Marcelina Rosales, a woman in her fifties who sells empanadas in the street. “I am worried about what will happen next.”
There is, however, one group that is still willing to take 100 bolivar bills off people’s hands. Criminals have reportedly been targeting people standing outside the banks, because they make easy targets with their bags of cash.
“Two people died during a robbery attempt in front of a Banesco branch,” this man tweeted on Tuesday, along with a photo of a body in front of the bank line.
The government’s currency withdrawal is being accompanied by a plan to catch up to inflation by introducing a new series of bills in denominations of 5,000, 10,000 and 20,000. Those bills aren’t in circulation yet, but are scheduled to be released on Thursday.
Officials say anyone left holding 100 bolivar bills after that will have an additional 10 days to trade them for the new, higher denomination notes at Venezuela’s Central Bank and at government “authorized” points.
But it’s not clear where those authorized exchange locations will be, or if there will be enough of them to take in millions of 100 bolivar bills still in circulation. It’s also unclear what will happen once the borders reopen. Businesses outside of Venezuela still have massive amounts of 100 notes, and might try to smuggle them back into Venezuela while avoiding getting caught and accused of being part of the alleged “mafia.”
“This presents more opportunities for corruption,” says economist Juan Nagel. “Every rule in Venezuela has a workaround.”