Xinhua News Agency, Beijing, September 9th, by wireNews Analysis: why Venezuela abandoned the US Dollar

Xinhua News Agency reporter Chen Yin and Feng Junyang

Venezuelan President Maduro announced on the 7th that Venezuela will use it in international payments because of the serious impact of the financial embargo imposed by the United States on Venezuela's economy and people's livelihood.RMB、Euro, Japanese yen, RussiaRubleIn order to get rid of the dependence on the US dollar, a package of currencies such as the US dollar is replaced as the currency for international settlement.

In a speech at the Venezuelan Constituent Assembly on the same day, Maduro stressed that Venezuela is "a victim of the US dollar payment system" and that the economic and financial embargo imposed by the US government on Venezuela has seriously affected its economy and people's livelihood.

In July this year, Venezuela held elections for the Constituent Assembly, which was strongly opposed by the United States Government. In late August, US President Trump signed an executive order banning US financial institutions from participating in new debt and equity transactions between the Venezuelan government and the state-owned Venezuelan oil company. American institutions are prohibited from participating in some of the bonds already issued by the Venezuelan public sector.

Although the United States Government said that financial sanctions against the Venezuelan government, will minimize the impact on the Venezuelan people, but in fact it is difficult to avoid the resulting negative spillover effects.

Maduro said, for example, that Venezuela plans to import 300000 doses of insulin, but Citibank of the United States refused to accept the transfer funds paid by the Venezuelan government for the purchase of drugs, resulting in drug imports blocked. Under the financial blockade of the United States, Venezuela's foreign exchange revenue and expenditure, food and medicine imports, and even athletes go abroad to book air tickets and hotels have encountered varying degrees of difficulties.

To this end, the Government of Venezuela decided to use a basket of currencies instead of the United States dollar in international payments. In the official foreign exchange auction system, the Venezuelan government will introduce these foreign exchange to enterprises for the settlement of import and export trade.

Maduro stressed that the United States has launched an "economic war" against Venezuela, and Venezuela must fight back.. "We must introduce a new international payment system, which we believe will open up a new path for the international monetary and financial system. "

In recent years, the inflation rate in Venezuela has remained high.BolivarA sharp devaluation. At present, there are several different exchange rates in the Venezuelan financial market, and the government strictly controls foreign exchange and gives priority to ensuring the import of urgently needed materials. Ordinary enterprises and importers have to exchange foreign exchange on the "black market" because they are unable to get enough US dollars. Under the influence of the expectation of currency depreciation, some enterprises and residents hoarded dollars, aggravating the "dollar shortage" in Venezuela.

Venezuelan economist Pedro Sanchez pointed out that Venezuela has been blocked and sanctioned by the United States in the international financial market, which has greatly increased the difficulty of financing, so it is necessary to turn to Europe and other emerging market countries to expand financing channels. The Venezuelan government's introduction of these countries' currencies into the foreign exchange trading system helps to reduce over-dependence on the US dollar.

Wang Peng, secretary-general of the Central American and Caribbean Research Center of the Latin American Institute of the Chinese Academy of Social Sciences, pointed out that as early as in the Chavez era, Venezuela proposed to use a currency other than the US dollar as the international settlement currency, but it has not been implemented.. The Maduro government abandoning the hard currency of the dollar and adopting a basket of currencies is more of a protesting policy proposition than a real economic measure.

He believes that Venezuela's current economy is not strong enough and its foreign exchange reserves are stretched. If Maduro's government does not make corresponding preparations for the implementation of this policy, Venezuela's domestic exchange rate fluctuations may be further intensified, which will eventually lead to confusion in foreign exchange settlement and make it more difficult for enterprises to invest and operate in Venezuela.

Yue Yunxia, a researcher at the Latin American Institute of the Chinese Academy of Social Sciences, said that after the international financial crisis, some developing countries found that after their currencies were pegged to the US dollar, their economies became more dependent on the United States, and the risk of economic fluctuations increased. Therefore, they began to choose a basket of currencies, including RMB, as the international settlement currency, which is a good thing for the internationalization of RMB.

She stressed that Venezuela's decision to introduce a basket of currencies includes rational elements such as enhancing economic autonomy and reducing exchange rate fluctuations. However, shortly after the United States announced financial sanctions on Venezuela, the Venezuelan side of this decision also has a certain element of stress reaction.

Yue Yunxia believes that Venezuela and the United States have deep-rooted economic and financial ties, and finance alone is very difficult to fundamentally change this situation. Therefore, the package of monetary policies that Venezuela hopes to implement may not play an obvious role in improving Venezuela's domestic economic situation.