Venezuela, a country of about 32m people, has experienced turmoil for some time. Hyperinflation, which has recently surpassed an staggering 833,000%, has left the nation’s economy in tatters. Widespread shortages of food, medicines, and other essentials are commonplace.
Paradoxically, Venezuela is oil-rich. The country was in fact one of the founding members of the Organization of the Petroleum Exporting Countries (OPEC), and by 2008, Venezuela’s output reached over 2m barrels a day.
But years of industrial mismanagement and controversial policies have brought about chaos and financial desolation nationwide for the once mighty exporter.
Now, Venezuela’s President Nicolas Maduro has resorted to the creation of a cryptocurrency in an effort to kickstart the ailing economy.
The Petro, supposedly backed by oil, was unveiled early in 2018. The currency was intended to work alongside Venezuela’s national currency, the bolívar fuerte. Initially touted as using the Ethereum blockchain, the Petro was then switched to NEM. The Government released a Whitepaper, which later faced accusations of plagiarism.
The international crypto community and Venezuela’s society at large greeted the Petro with deep skepticism. Critics said that the Petro was backed by nothing, and that it only really existed in the Government’s collective imagination.
Now, Petróleos de Venezuela, S.A. (PDVSA), Venezuela’s state-owned oil company, wants to present the Petro as “unit of account for oil” to the OPEC. The move, planned for 2019, is a bold one. The official line is that all oil generated in Venezuela will trade exclusively in the national cryptocurrency. This is unheard of among OPEC countries.
To further compound the issue, PDVSA itself is laden with massive debt to the tune of $45bn and has shown little trading activity in recent times. This casts a big question mark about Petro’s worth as unit of account for oil, and its acceptability outside of Venezuelan borders.
Traditionally, oil trade is conducted in U.S Dollars, so it is hard to see a future to Petro-backed transactions in the international market.
Nevertheless, Maduro keeps pushing for the nationwide implementation of the Petro as unit of account, going as far as suggesting that the country’s pricing system and workers’ salaries be pegged to the cryptocurrency.
Written by: Fernando Sanchez