Venezuelans rush to stash cash before biggest bill is voided

Venezuelans were wearily rushing to deposit bank notes or dump their cash savings entirely on Monday following an announcement by President Nicolas Maduro that he was invalidating the country’s biggest bill because of what he says is an attack on the nation’s liquidity.

The socialist leader shocked the country on Sunday when he said the 100-bolivar note would be removed from circulation within 72 hours. For months, the South American nation has suffered a hard-cash shortage as inflation spirals toward 500 percent, which Maduro insists is the product of an “economic war” and an attempt by his political foes to smuggle currency out of Venezuela.

Maduro doubled down on those claims Monday evening, ordering an “inevitable, necessary, radical” measure to close his country’s border with Colombia for three days while authorities yank the bills from circulation.

Higher-denominated bills are scheduled to be released this week, but Venezuelans, already reeling from a deep recession marked by triple-digit inflation and rampant shortages of consumer basics, seemed to let out a collective groan as they added an unscheduled trip to the bank to their list of woes.

“This is madness,” Leopoldo Lopez, a 54-year-old insurance salesman, said as he waited in line to deposit a thick wad of banknotes at an automated bank machine in eastern Caracas. Lopez griped that, just days before, he had endured a long wait to get cash, only to be forced to line up yet again to deposit it. “At this point I have no idea where we’re headed,” he said.

According to a report by Torino Capital, a New York investment bank, the 100-bolivar notes account for more than three quarters of Venezuela’s cash outstanding and 11 percent of the nation’s money supply, making Maduro’s decree a difficult task for a nation in the throes of an economic crisis.

Long lines extended from many ATMs around Caracas on Monday, but authorities showed no signs of relenting on the deadline. Speaking at a press conference, Interior Minister Nestor Reverol insisted the country had endured a financial attack led by the U.S. to “leave Venezuela without liquidity.”

Reverol accused the U.S. Treasury Department of working to spirit the country’s 100-bolivar notes to Europe to destabilize the Venezuelan government. The U.S. Treasury Department declined to comment.

Although the interior minister said he met with the country’s banking association to ensure Maduro’s orders would be executed smoothly, confusion abounded in the capital because Monday happened to be a bank holiday, creating a bottleneck at ATMs for Venezuelans trying to protect their cash savings.

“We’re not just going to throw them all away,” said Israel Usechi, a 30-year-old motorbike messenger, pointing to a gym bag of bills he was waiting to deposit.

While the country’s economic crash has reduced the value of the 100-bolivar note on the black market to just a few U.S. cents, cash transactions remain the predominant method for large swaths of the Venezuelan population. Economists estimate that more than a third of Venezuelans don’t have a bank account, forcing them to depend on brick-thick bundles of bills for the basics.

Further complicating matters, the country’s credit card systems often crash, meaning Venezuelans can’t rely on solely plastic. On Dec. 2, much of Venezuela’s commerce ground to a halt after the country’s leading financial transaction firm, Credicard, had a system failure.

It all adds to the mounting headaches for someone like Lilia Moreno, a 42-year-old hotel janitor who had been stockpiling cash for Christmas presents. Now, she said, she faces a race against time to save her nest egg.

“Here, our lives just keep getting more complicated,” she said while waiting outside a supermarket. “Today we’re in one line, tomorrow another.” Andrew Rosati, Bloomberg