This article was written as part of the course “Latin American Economic Development” offered by Professor Marla Ripoll, Department of Economic, University of Pittsburgh.
The United States Treasury Secretary announced on last March that President Donald
Trump signed an executive order banning all transactions within the United States or by US
citizens that involve Venezuela’s new cryptocurrency. The petro, which was Venezuelan
president Nicolás Maduro’s plan to combat the rising hyperinflation and devaluation of the
bolívar (Venezuela’s currency), was launched in February and is backed by
Venezuelan crude oil. Critics of the petro and socialist president Maduro have said that the petro
is a “desperate attempt to raise capital” in order to pay off foreign debts. The United States
government, specifically the Trump administration, has said that the petro is an effort to
circumvent current US sanctions on Venezuela.
The tough economic sanctions on Venezuela include a ban on banks making deals with
the Venezuelan government or the state-run oil company, along with the blacklisting of four
Venezuelan government officials. In response to both past economic sanctions and the recent ban
on the petro, the government of Venezuela has accused the United States, along with President
Trump, of a “new imperialism” and has decried the US president as “warlike” and a “supremacist.”
The governments of Venezuela and the United States, despite historically being large
trading partners (mostly with oil), have faced recent rocky tensions, especially with Maduro as
president. Maduro is a member of the socialist party of Venezuela, something that the United
States government (especially with the current right-wing leadership) does not view favorably. The Trump
administration, through Treasury Secretary Steven Mnuchin, has accused Maduro of
“decimating” the country’s economy and causing a humanitarian crisis. Maduro has decried the
United States’ sanctions as imperialistic.
The petro has been in presale since last month, with Venezuela hoping to sell 100 million
tokens of the new cryptocurrency. This would place its value at 6 billion US dollars. In the last
few years, cryptocurrency, based off of cryptographic blockchain technology, has exploded, with
its most popular currency Bitcoin reaching almost 18,000 US dollars per token. Ever since
Bitcoin’s meteoric rise, the cryptocurrency market has increasingly developed around the world.
Since cryptocurrency is inherently worth nothing, and is purely speculative, it is risky to be used
as a national currency. No sovereign government has ever used a cryptocurrency as their national
currency, making it an unusual and precarious choice for Venezuela. According to President Maduro,
the petro can help Venezuela out of its current financial crisis by increasing the country’s
monetary sovereignty and also allowing new forms of international financing to become
available to Venezuelans. The petro, however, can only be used in transactions that involve the
US dollar, the Euro, and two other cryptocurrencies- Bitcoin and Ethereum. This makes it
difficult to use for the average Venezuelan. Currently, the main use of the petro for Venezuelans
is to pay taxes to the government of Venezuela.
The effects of the United States’ ban will be wide-reaching. Since the petro can be traded
in so few currencies, the removal of the US dollar from that list will hurt both the petro’s uses
and its value. If Maduro’s plan succeeds in the ways he has stated it will,
Venezuela will be able to better pay off its foreign debts, attract foreign investors with
a stable currency, and fight hyperinflation and devaluation. The petro, being a speculative
cryptocurrency, could be free from dependence on other currencies like the US dollar and could
given Venezuela a completely sovereign currency, with little to no worry about exchange
rates. The US sanctions, including the ban of deals involving the petro, the blacklisting of
Venezuelan government officials, and the ban on bank transactions with the Venezuelan
government or its state run oil giant, have aided the political instability of the country, whether or
not that was the intended effect.
The United States government, while stating that they care mainly about the humanitarian
crisis in Venezuela, would gain politically if Maduro left or was removed from office. It is highly
likely that the United States government has been attempting to destabilize the government in
Venezuela through the use these sanctions. The political instability and sanctions will hurt
Venezuelans in the short term, according to experts. Regardless of their intentions, the United
States government with have their eyes on the upcoming elections in Venezuela later this year.
The petro, along with US sanctions and the economic relationship between Venezuela and the
United States, will undoubtedly be a topic of discussion during the Venezuelan presidential
election. The effects of Trump’s petro ban will be felt across Venezuela, for better or for worse.