Venezuela Pegs its Fiat to Petro Coin as Latin America Faces Mixed Fortunes

Venezuela and crypto

By every measure, the past few months have ended with drama across Latin America. Venezuela took the momentous step of announcing it would peg its fiat currency the Bolivar to its state-created crypto, the Petro. Beyond the crypto news out of Caracas, developments in nations north and south of Venezuela ensured Latin America and the world will begin the new year with a new look to the region, for better or worse.

Uncharted waters

By announcing it would peg its sovereign bolivar to the petro, the Venezuelan government has undoubtedly struck out on a bold path.

Outlining its plan to see the newly created sovereign Bolivar currency move in line with the Petro (which in turn moves in line with oil prices), it follows on the heels of previous boasts by the government that its pre-sale of the crypto back in March 2018 saw it raise $735 million on its very first day, this before the project ultimately stalled as it failed to reach the $5 billion target for its launch.

Ultimately, in devaluing its old currency by whopping 95%, and pursuing a ‘Hail Mary’ attempt to bring about a resurgence of the Petro, the Venezuelan government is pursuing a great new risk for its economic future, especially given the contention beyond Venezuela that the Petro is not a real crypto. Yet, for many crypto enthusiasts that do believe in the potential of a state-backed crypto, the outcome of Caracas’ latest venture will not only be a compelling story in Venezuela’s future, but also in the general public’s appetite for state-backed crypto discussions if the Petro indeed becomes a new shorthand for disaster.

While Venezuela has certainly competed for the lion’s share of economic news in Latin America over the past month, a brewing crisis further south has now added a whole new dynamic to the region.

Mauricio Macri
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Argentine president Mauricio Macri has raised interest rates again. Image credit: By Marcos Corrêa/PR -, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=63206915

Argentina and interest rates

Late August saw news out of Argentina that it would lift its benchmark interest rate to 60%. In terms of economic rankings in Latin America, Argentina trails only Brazil and Mexico, so this crash has made waves far beyond Argentine officials in Buenos Aires, especially in a period where the Brazilian government’s plans for an economic comeback haven’t delivered after the longest recession in its history ended in early 2017.

The cash rate in Argentina is now officially the highest in the world, but the Argentine economy has also reached new lows. Its currency (the Peso) has plummeted in value, and now once more the embattled administration of President Mauricio Macri must seek new support from the International Monetary Fund, seeking to find a credible new path out of this crisis.

Mexico and trade

Recent months have also seen Mexico and the United States announce a new agreement on a new trade deal that will replace NAFTA, along with their northern comrades in Canada.

This would usually be clear-cut good news for Latin America as it quells risk of a trade war between Washington and Mexico City.  But the often unpredictable nature of the Trump White House — and the reality Mexico will soon transition from President Peña Nieto to the less neoliberal and less orthodox President-Elect AMLO — means an undercurrent of uncertainty remains.

Altogether now

Ultimately the fortunes of each nation in Latin America will be forged by each government. Yet as the world’s biggest economies like the U.S. and China flirt with a trade war, and the EU and UK remain embattled over the Brexit issue, there’s both opportunity and necessity for Latin American nations to find a new path to growth. In the region and beyond, millions will be watching with aspiration and anxiety for the its next big chapter.

 

 

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Ed Kennedy
Ed Kennedy is a journalist at BlockTelegraph News and a web developer from Melbourne, Australia. A keen technologist with an enduring interest in the rise of a truly digital global economy, Ed is passionate about the transformative potential blockchain offers our world.

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