Chavez signs law-decree
for monetary reform
CARACAS, Venezuela — Tuesday evening, during his radio program Aló Presidente, President Chavez signed into effect the law for a reform of the country’s currency, such that as of January 1, 2008 three zeros will be eliminated from the denomination. The reform is supposed to simplify accounting and increase confidence in the currency.
The practical implication of the new currency is that 1,000 bolivars, as the Venezuelan currency is known, would be worth 1 new bolivar. This means that, at the official exchange rate one dollar will be worth 2.15 bolivars as of January 1, 2008. (The black market rate currently hovers between 3,500 and 4,000 bolivars.) In comparison, one dollar is worth 2.13 Brazilian reals and 3.10 Argentinean pesos.
Chavez was able to pass this new law on the basis of an "enabling law" that the Venezuelan National Assembly passed in January, which allows the president to pass laws by decree in ten different areas for a period of 18 months.
Yesterday evening the board of directors of
Chavez at first stated that the name of the currency will not change, the
Central Bank President, Gaston Parra, explained that for a transition period of
between six and twelve months the new currency will be known as the “strong
abbreviated as Bs.F. After this transition period it would go back to the
original name, bolivar (Bs.), since this is the name the currency has in
Parra further explained, “The monetary reconversion will not alter the relative value of incomes, expenses, debts, etc.”
The reform’s main purpose, according to the Central Bank, is to “achieve greater efficiency in the system of payments,” “simplify the calculation of economic transactions,” and “simplify the financial management and budget of the country.”
Some in the Chavez camp, such as the National Assembly deputy Elvis
Amoroso, who is a member of its finance committee, argue that the reform would
also help lower inflation. As an example he cited the experience of