Letters from Venezuela: Fiat Settlements for State-Backed Crypto Petro Cancelled, $3 Minimum Wage

TL;DR: Letters from Venezuela is an exclusive CoinSpice series, an inside look from a reporter on the ground, documenting the South American nation’s last stand among sanctions, political unrest, international condemnation and concern, economic collapse, and the specter of cryptocurrency possibly demonstrating its main use case. In this installment, the government suspends fiat settlements for purchases made with its state-backed crypto, Petro, and raises the minimum wage to $3 a month.

Fiat Settlements Suspended for Petro Purchases

The petro airdrop that the Venezuelan government paid to pensioners and state workers as a sort of Christmas bonus, partly responsible for further devaluation of the national fiat currency, the bolivar, is still causing all sorts of distortions in the domestic economy. As referred to in the last installment of Letters from Venezuela, while there was a way for citizens to exchange their petros for bolivares, the majority spent the airdropped amount (0.5 petros) to do their holiday shopping because the exchange rate in private exchanges was lower than the amount paid by the government.

The stores that received petros as payment using the Biopago point-of-sale system, the fingerprint-secured system connected to the Motherland platform where petros are stored, received the settlement in bolivares to their bank accounts. This fueled the acceptance of the bolivar and not petros because, in reality, merchants never received petros. ASONACRIP, the National Association of Cryptocurrencies, a private non-profit whose objective is to help with cryptocurrency adoption in the country, reported these fiat settlements will be suspended, and now every payment made with petros through Biopago will be settled in petros.

Compounding matters is how, in response, the country’s central bank issues more bolivares into the economy through merchants who, out of rational self-interest, exchange them for harder currency such as US dollars. Furthermore, data supplied by the Bank of Venezuela shows most who received petros haven’t actually spent them. This could mean the latest announcement to prevent fiat settlement many of the businesses accepting petro will be ever-more hesitant due to its limited reach and value. In turn, Venezuelans will have greater difficulty trying to exchange or spend their petros. Meanwhile, the Biopago platform is still undergoing maintenance, as officials are building the system to allow each business to have its own wallet to receive the petro.

Minimum Wage Increased to $3

The economic crisis continues to worsen due to implicit inflation increases in the exchange rate to the US dollar as most prices for goods in the country are being calculated in dollars. Despite this inflationary disaster, the Venezuelan government also announced a minimum wage increase of 65%, a number that might seem impressive at first, but that does not represent a real improvement for workers. The wage rose from 150,000 to 250,000 bolivares, leaving the value of the wage at approx $3.

Long lines to buy products with petros

This hike is insufficient for Venezuelans to even purchase a kilogram of meat (it’s currently 300,000 bolivares, $4). Inflation numbers were astounding last year, reaching five-digit levels (more than 3,000% according to some sources, but calculated at 13,000% by the National Assembly). This was accompanied by a sharp shrinkage of the economy generally, contracting as measured at 35% of the GDP. According to CENDAS, an internal workers’ research organization, a Venezuelan family would need to earn the whole monthly salary each day just to satisfy their food expenses.

Minimum wage raise decree

Experts forecast another harsh year for Venezuelans as the country begins its 2020. Predictions for inflation in prices are at least 3% along with another 10% fall in GDP, pushing on an already precarious economy, but still hurting the citizens and companies trying to operate in the country.

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