Venezuela’s announcement that it will issue a virtual currency or cryptocurrency – the petro – to evade US financial sanctions, a strategy that Iran and Russia have also promised to explore, aims to give the impression that a parallel financial system could emerge that does not It would take a long time to threaten one of the main weapons in the arsenal of Washington’s foreign policy.
It is not weird. Since the attacks of 2001, financial sanctions have been the first resort of the USA against terrorist organizations, the nuclear programs of Iran and North Korea, the Russian annexation of Crimea and the violations of human rights in Venezuela, among other cases.
The hegemony of the dollar and its control of the epicenter of the global financial system allows Washington to exert enormous pressure on any wayward state. 60% of the countries now have the dollar as “anchor” -that is, the currency with which they stabilize the value of their own currency-, compared to 30% in 1950 and 50% in 1980. And given that those countries They represent 70% of global GDP, Ruchir Sharma recalls in The New York Times that most of the world lives in the dollar block. To safeguard their money, central banks prefer Treasury bonds, which appear as dollars in their currency reserves.
Since 1980, the proportion of the dollar in global reserves has remained at 66%. Today almost 90% of international transactions financed by banks are also made in dollars, a record number and a clear sign of confidence in the political and financial institutions of the US.
Cryptocurrencies and block chain
Venezuela imports more than 80% of its food and medicines, for which it has to pay in dollars, increasingly scarce due to low oil prices and US financial sanctions. Russia, for its part, is trying to escape from this monetary shackle by developing an alternative international payment system to Swift, the Brussels-based platform that connects the global financial system. The efforts of Moscow have so far been unsuccessful. It is logical. The big banks – and the more than 11,000 financial entities linked to Swift – have no interest in joining a new organization that would open even greater opportunities to money laundering and tax evasion.
Cryptocurrencies and the blockchain – the decentralized technology that makes virtual currencies possible – could become a means to achieve those same goals. According to Elizabeth Rosenberg , who worked in Obama’s Treasury Department, digital financial innovation could reduce the US’s punitive ability in that field.
In fact, bitcoin was used at the beginning for transactions that were intended to be hidden. But in 2013 the FBI closed Silk Road, an online market for illegal drugs that used Bitcoin, tracking the public records of the blockchains , the dates and amounts of each transaction and what accounts were involved. The Treasury Department has already warned investors that using the petro will violate the sanctions regime against Caracas.
But it’s probably not even necessary. Chavism has been unable to maintain the stability of the bolivar. This year inflation could exceed 13,000%, compared to 2,700% in 2017, according to the IMF.
But Francisco Monaldi , an energy expert at Rice University, believes that the petro is pure fiction. The reason is simple. The first requirement of a successful cryptocurrency is the trust placed in it by its users. And the Chavez regime, he points out, does not even publish official inflation data.
According to Oxford Economics, the Venezuelan economy contracted 7.6% in 2017. If all its debts are included, PDVSA owes almost 56,000 million dollars. The oil services company Schlumberger has had to writeoff 938 million dollars for non-payment of the oil company.
Venezuela itself has lost its right to vote in the UN for failing to pay its dues. Even Cuba has taken control of PDVSA’s participation in the Cienfuegos refinery to compensate unpaid debts.
The petro, an oxymoron
A government cryptocurrency is really a contradiction in terms. The key to a virtual currency is that it is not issued by any government, central bank or other financial authority. The Chavez regime has even announced that the operations with the petro will be supervised by the Superintendence of Cryptocurrencies, which will also set its price.
There are too many loose ends. For example, what value can oil not extracted have if the only means of extracting it is through mandatory associations with PDVSA? The petro, therefore, would be a digital title or rather a promissory note of a bankrupt government.
Even China and Russia are simply refinancing the pre-Caracas credits in exchange for future oil deliveries, leaving the country with less and less oil to sell in exchange for fresh money.
Even if Venezuela were to issue those promissory notes disguised as cryptocurrencies, their value would soon devalue. Raúl Gallegos , an analyst at Control Risks and author of Crude Nation , a book about Venezuelan Chavez, believes that, therefore, the real objective of the petro is to serve as a vehicle to secretly take money out of the country to launder or hide it in tax havens, which is precisely not missing in the Caribbean, pirate’s paradise.
-LUIS ESTEBAN G. MANRIQUE