Hyperinflation forces Caracas to import paper money to try to alleviate the cash shortage.
Venezuela has started importing paper money, and is studying plans to print higher denomination banknotesas hyperinflation causes cash shortages, according to six people with knowledge of the matter.
Throughout 2020, the country has imported about 71 tons of paper security from an Italian printing company owned by private equity firm Bain Capital, according to some of the people and data reviewed by Bloomberg from Import Genius, which collects customs records it obtains from private sources.
The central bank is considering new bills let them start in the 100,000 bolivars. It would be the highest denomination yet, but it’s still only worth $ 0.23.
Press officials at the Fedrigoni SpA and Bain Capital printers declined to comment on the paper shipments, which came from Brazil. The Venezuelan central bank did not respond to calls and messages seeking comment.
The need for larger notes in Venezuela is the direct result of an increasingly weak currency and a inflation which was estimated at a 2,400% last year. This means that paying for a grocery cart full of merchandise now requires a bag of cash.
The 100,000 bolivar bill would match the biggest bill never printed in Venezuela, one made two years ago during the days of the strong bolivar (the latest version of the currency is called the sovereign bolivar).
The central bank is considering introducing even larger denominations in the future.
Earlier this year, Venezuela turned to a state money printing press in Russia to buy 300 million new banknotes after running up debts with De La Rue, one of the largest banknote manufacturers in the world.
More than a decade of political mismanagement and failed economic policies means that the national mint has to overcome a series of additional obstacles to insert the new bill.
Downsizing due to the pandemic, as well as ink shortages and technical challenges from missing parts, coupled with frequent power outages, have delayed attempts to get the printing equipment up and running, two of the companies said. people.
The recent shipment will be Fedrigoni’s last as it complies with a contract signed in 2018, a year before Venezuela’s central bank was sanctioned by the US in its efforts to isolate the regime of Nicolás Maduro of the world financial system, according to two sources.
The Verona-based printing company was later acquired by Bain.
Venezuela’s economy is in its seventh consecutive year of recession and is projected to decline another 20% this year due to the coronavirus lockdown and collapse in oil revenues.
Previous attempts to stabilize the currency by cutting zeros and printing new banknotes have failed.
Authorities have turned a blind eye to an increased number of transactions made in US dollars, with Ecoanalitica estimating that around 60% of all purchases they are now made with green bills.
Venezuela has been suffering from hyperinflation since 2017, decimating the ability of most Venezuelans to buy even the most essential goods, let alone save. The average family requires more than 100 times the official minimum wage to meet your needs basic.