Venezuelan Banking System Dollarization Process

in Project HOPE5 months ago

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In this article, I will talk about the "Venezuelan Banking System Dollarization Process".

For this, I will analyze the initiative taken by the National Executive through the Central Bank of Venezuela (BCV), where it is proposed to establish a compensation and settlement system based on American currency.

For approximately 6 months, five private banking entities have offered Venezuelans the opportunity to open an account in Dollars. This was a great surprise since 20 years ago an exchange control was established in Venezuela that gave the State the exclusivity of the management of foreign currencies.

This measure seriously affected private imports and created a great source of corruption due to the exchange rate of preferential rates, which, added to a brutal bureaucracy, allowed the illicit enrichment of many government representatives. But this is another matter entirely.

These private banks in Venezuela, which offer services to their clients with dollars, so far only allow cash deposits, withdrawals, and transfers between accounts of the same bank.

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November 16, 2020

On this date, according to information provided by the portal Bloomberg, the BCV has met with these banking entities with the intention of developing the mechanisms to create and establish a clearing and settlement system based on American currency.

Within this system, the Central Bank of Venezuela (BCV) would function as a "dollar clearinghouse" thus creating a bottleneck that would centralize the management and distribution of foreign currency.

The only positive aspect that we could find in this process would be that it would allow (In theory) to formalize transactions in dollars within the Venezuelan banking system.
With this, interbank transfers and the issuance of financial credits would be possible.

ph venezuela cintillo.jpg


Venezuelans are experiencing a process of dollarization of the economy, which has been developing informally for more than three years, although in the last semester of 2020 it has been accentuated to the point that daily transactions such as food purchases, or the cost payment of a taxi are being made with the use of physical dollars.

The national currency "EL BOLIVAR" is practically out of circulation. After three reconversions and the issuance of five monetary cones, the value of the Bolivar was pulverized.

The highest denomination banknote that is in circulation (50,000.00 Bs), does not reach the value of a piece of bread.

This process of dollarization of the national banking system should provide greater stability to the economy, which should have a positive impact on the well-being of Venezuelans.

When we reflect on the fact that, it will be the central bank (BCV) that will govern the operation of this system, we can only feel mistrust.
The government of Venezuela is recognized in the world for its high levels of corruption, for this reason investors should feel great fear of placing their dollars in the hands of unscrupulous people who could seize all that capital or apply commissions or speculative clauses that would undermine the financial power.



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good article, according to Mr. "luis Vicente león" in Venezuela there is not and will not exist a dalorazacion, on the other hand a user of social networks uploaded to instagram a video where he manages to withdraw dollars in cash from a Venezuelan bank

 5 months ago (edited)

Luis Vicente León said that? Lol!

Dollars may be the textbook example of fiat coins, but they are also a necessity if they can bring stability and interoperability in a transaction system affected by catastrophic inflation. First make the system usable, then improve it. There's no point in trying to disrupt a broken system as no one could use it anyway.

 5 months ago 

Great reflection!
Are you Venezuelan?
You have an idea quite close to the reality of the Venezuelan economy.

Venezuela's economic and financial system is so corrupt that it would not matter which currency is adopted, the conditions will always be the same and even worse as the clock is ticking.

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 5 months ago 

@tipu curate 4

Greetings dear @juanmolina, the dollarization is a process that began informally, perhaps this is the way to give legality to a currency that has already displaced the official one as you have well defined, let's just hope that it has a positive impact on the welfare of Venezuelans and does not end up being another mechanism to enrich a few.

 5 months ago 

We, Venezuelans, have enough experience to know that will happen.
They are 20 years under a criminal regime.

I don't know if Venezuela can get out of the hole in which the economy is, not with the dollar, the euro, with anything, unless the current government leaves and the United States finally removes all the sanctions in addition to the return of private investment, of the rest, I don't see it.
Only dollars are coming in, or in good measure if those of us who are abroad send them into the country, or the little that comes in for oil, but not for investment, and as long as that does not happen, the country will continue to plummet, unfortunately.

 5 months ago 

Corruption is soaked to the bone in the political and financial system of Venezuela. This is why the economy will never rise.

Everything is part of a philosophy of government that seeks the domination of the population. For this they play with the hunger of the people while on the other hand, they support a criminal structure financed by drug trafficking.

It is very good to see that the world is moving - albeit slowly and unevenly in many cases - in the same direction (in this financial aspect).

 5 months ago 

Not all that glitters is gold.

Hello friend, I also heard about it, but as you say it is to distrust, I think that in the government of our country you can no longer believe, but well I hope it is something that benefits all our people and they can take advantage of it! Greetings!

 5 months ago 

Hello Franyeli.

I hope it is something that benefits all our people...

Not at all. It will only benefit a few.

This process of dollarization of the national banking system should provide greater stability to the economy, which should have a positive impact on the well-being of Venezuelans.

I hope so and i am waiting for this to be happen but I am also expecting something better from venezuela government also. If they will play major role , it is get lots of help to improve the situation. Thanks for sharing the updates.

 5 months ago 

Thank, for your good wishes, also I thank you for stopping by, reading, and commenting.

Certainly a process of formal dollarization in the country could improve our purchasing power, the fear perhaps lies as you say in the people of the Venezuelan government so they try to take over the capital and place tax legislation that ends up affecting, so hopefully the remedy is not worse than the disease. Greetings my dear friend @juanmolina and thanks for sharing

 5 months ago 

A great vision that you have.

...hopefully the remedy is not worse than the disease.

I really also hope so.