Venezuela banks on petro, but it remains 'non-transferable'

Caracas

VENEZUELA'S controversial cryptocurrency was launched six months ago but has been left in limbo ever since. Now, though, President Nicolas Maduro's government insists it will start working.

That wasn't Armando's experience when he tried to make a transaction using the petro.

"Non-transferable" was the message that came up on his telephone, shown to AFP, when Armando - not his real name - tried to use the half petro he bought earlier this year.

Mr Maduro launched the petro to try to circumvent debilitating United States sanctions - but the problem is that it can't be exchanged for money, goods or even other cryptocurrencies such as bitcoin.

It is also not listed on virtual exchanges, although the Venezuelan government has set its value at US$60, anchoring it to the price of a barrel of oil.

"It still doesn't exist," Moises Rendon, from the Washington-based Center for Strategic and International Studies, told AFP.

However, Mr Maduro says that from Oct 1 "the petro will start functioning as a currency of exchange of purchase and conversion".

It will be offered in auctions through which private companies can access currencies, within the framework of an exchange control that has been operating since 2003.

This way, Mr Maduro says, "it will be immersed in the global market."

However, Mr Rendon says "it's too late to save the petro. There's no confidence and it won't get any" while the government prevents its value from fluctuating freely.

Venezuela is in desperate need of liquidity due to its struggling oil industry - currently producing a 30-year low of 1.4 million barrels a day, compared to the record high of 3.2 million 10 years ago - and an external debt of US$150 billion.

Washington's economic sanctions are strangling the country, preventing the government from getting its hands on the foreign capital it desperately needs.

But after the emission of 100 million petros announced by Mr Maduro amid much pomp and ceremony in March, only a handful of blockchain transactions have taken place.

Mr Maduro claimed Venezuela had received "offers of purchase intention" worth US$5 billion but the petro blockchain on the NEM platform registered transactions amounting to just over 2,250 units, the equivalent of around US$136,000 between March 25 and May 6.

There was supposed to be a private pre-sale launch of 38.4 million petros in February and a public sale of another 44 million in March, with the government reserving 17.6 million.

Buying petros "is very risky," according to Armando, who lives off cryptocurrencies. He lists his small petro investment as a loss.

The government says it is supporting the petro with an as-yet-unexploited crude field in the Orinocco Belt, the largest crude reserve in the world. But "it doesn't know how to exercise its rights" over that reserve, said oil specialist Luis Oliveros.

But while the petro has failed to engender investor confidence, other cryptocurrencies have proved hugely popular in Venezuela as a guard against hyperinflation, expected to reach a mind-blowing one million per cent this year.

Venezuela is the country that conducts the fourth-largest amount of its transactions, 12 per cent, with bitcoin, said Mr Rendon.

Jose Angel Alvarez, president of the private National Cryptocurrency Association, believes the petro could rebound if it was left to float freely and subject to "clear rules".

But that is an unlikely scenario, given Washington has banned petro transactions, while risk rating websites such as icoindex.com describe the petro as a "scam".

The petro holds a central role in a series of economic reforms launched by Mr Maduro to try to bring an end to four years of recession that have left the country suffering from shortages of basic necessities such as food and medicines.

Another was devaluing the currency by 96 per cent and hiking the minimum salary by more than 34 times.

With industry operating at just 30 per cent and Venezuela almost entirely dependent on its oil sales, long-suffering citizens have yet to see any evidence that the petro will be the answer to their prayers. AFP