CARACAS, Venezuela—Businesses closed, banks struggled with transactions and people scrambled to find fuel Saturday, signs of panicked and skeptical reactions to government measures aimed at stabilizing a faltering economy.
said he would raise wages by nearly 6,000% and would devalue the already-embattled currency by 96%, in a televised announcement late Friday.
A former bus driver and union activist, Mr. Maduro said he himself devised the plan. But the response—visible in stores and shops—indicated Venezuelans’ alarm and fear that the measures, instead of shoring up the economy, would destroy what’s left of a once-wealthy nation now mired in hyperinflation. The size of the economy has shrunk by more than half since Mr. Maduro took office in 2013.
Widespread shortages of food, medicine and clean water have pushed 2.3 million Venezuelans to flee to neighboring countries since 2014, according to the United Nations.
Marcos Vizcaino, 56, said he was closing down the auto shop that his father opened here in 1965 because he couldn’t afford the wage hikes. “I can’t take it anymore, I give up,” said Mr. Vizcaino, who added that this business already had been losing money. “I feel bad for my employees, but I can’t keep bleeding out like this.”
The devaluation is the largest in Venezuela’s history, according to research group Sintesis Financiera. Mr. Maduro’s measures will likely push inflation even higher than the 1,000,000% forecast for this year by the International Monetary Fund, said Anabella Abadi, an economist with the Caracas-based consulting firm ODH.
The minimum-wage increase is the fifth this year, to the equivalent of about $30 a month, compared with $1 a month previously. Workers will be paid with a new currency called the sovereign bolivar, which will be rolled out next week and erases five zeros off the existing currency, called the strong bolivar.
“I want the country to recover, and I have the formula,” Mr. Maduro said in the televised address. To help small businesses cope with the transition, he said the government would pay the difference in worker salaries for 90 days. But Mr. Maduro gave no explanation of how the payments would be disbursed, leading business owners like Mr. Vizcaino with little hope for a turnaround.
Mr. Maduro is deeply unpopular and earlier this month was the target of an alleged assassination plot. He has blamed the incident on his political rivals and jailed a prominent opposition lawmaker, prompting the U.S. and countries around Latin America to condemn Venezuela’s increasingly authoritarian and isolated government.
Economists worry that Mr. Maduro’s measures will lead to more currency printing that will fuel inflation further. The government is in default on $6 billion of debt, and export earnings are declining due to falling oil output. Central Bank data shows that monetary liquidity, a measure of the numbers of bolivars in circulation, has surged more than 30-fold in 2018.
“There is nothing, absolutely nothing that will lead to a stabilization phase and the attraction of investments,” said Sintesis Financiera economist Tamara Herrera. “There is going to be a very strong inflationary impact. It seems that they are getting close to extracting the last of what remains of the productive system.”
Adding to the confusion, Mr. Maduro said he would peg the value of the new sovereign bolivar to the petro, an oil-backed cryptocurrency that the government launched earlier this year. The government has released scant details on who, if anyone, is using the petro. The currency has been banned by the U.S. Treasury Department, which called it an effort to scam international investors and skirt Washington’s financial sanctions on Caracas.
Homemaker Marta Ramirez said she ran out on Saturday to spend the money she has in her bank account but saw empty shelves at the few open shops she found.
Cash has all but disappeared, with the government too broke to print enough bank notes to keep up with inflation. To make matters worse, she—like many others—couldn’t get her debit card to work as financial institutions struggled to adjust to Mr. Maduro’s economic plan.
“It makes me want to cry,” the 51-year-old said. “The little money I have will soon be worth nothing.”
In addition to the currency moves, Mr. Maduro has also said he intends to cut gasoline subsidies in order to reduce the smuggling of Venezuelan fuel to neighboring countries, which costs the government billions of dollars each year.
Mr. Maduro hasn’t specified when gasoline prices may start rising. Some of his detractors have started to call his plan a “neoliberal” austerity package that undermines the socialist ideology long espoused by his ruling party.
Caracas cabdriver Daniel Perez, 43, on Saturday rushed to fuel up before the president’s plans come to fruition but found gas stations unwilling to accept the existing bolivar bills.
“We’ve been in line since dawn, and we still haven’t filled a tank of gasoline,” Mr. Perez said. “With this economic disaster, you never know how much it’s going to cost to fill up your tank next time.”
—Ryan Dube contributed to this article.
Write to Kejal Vyas at [email protected]
Source : WSJ