Nicolas Maduro ordered a 96 percent currency devaluation, pegged the bolivar currency to the government’s petro cryptocurrency and boosted taxes.
After Venezuelan President Nicolas Maduro’s 60-fold increase to the minimum wage, storeowners on Saturday wrestled with an anguishing decision: Close up shop or hit customers with steep price hikes at the risk of sinking the business.
In a set of sweeping announcements that shocked many Venezuelans, the socialist Maduro on Friday ordered a 96 percent currency devaluation, pegged the bolivar currency to the government’s petro cryptocurrency and boosted taxes as part of a plan aimed at pulling the OPEC member out of its economic tailspin.
The measures especially spooked shopkeepers already struggling to stay afloat due to hyperinflation, government-set prices for goods ranging from flour to diapers, and strict currency controls that crimp imports. Many stores were closed on Saturday as owners hunkered down to consider the implications.
Economists warned that some companies would go under, unable to shoulder the massive increase in monthly minimum wage from 3 million bolivars to 180 million bolivars, or roughly $0.5 to $30. That will likely increase unemployment and further fuel mass emigration that has overwhelmed neighboring South American countries.
Jhonny Herrera, 41, owner of a hardware store on the windswept Paraguana Peninsula in northern Venezuela, said he would have to fire two employees because he cannot afford to pay them, leaving him with just one worker. When Venezuela was enjoying a decade-long oil bonanza, he had 10 employees.
“I have thought about closing for good and leaving, all the more so now with these increases. I have held back due to my 14 year-old-son, who I would leave here because I need to emigrate first,” said Herrera, surrounded by stores that have been shuttered after their owners fled the country.
To soften the blow, Maduro vowed that the government would cover three months of the wage increase for small and medium-sized companies. But he did not provide details and it remains unclear how his cash-starved government would afford such a hefty payout or whether the chaotic administration has the logistical capacity to pay wages on time.
The Information Ministry did not respond to a request for an explanation of the plan. Venezuela’s main business chamber, Fedecamaras, said it did not have any estimates on the effects of the measure yet, although local economists predicted a heavy toll.
“A minimum wage of 180 million bolivars in this current situation implies the closure of thousands of companies and the unemployment of many people,” said economist Luis Oliveros.
Bakery owner Luis Carballo, a 59-year-old who has worked in the bread sector for 45 years, said he would try to stay afloat but was full of dread.
“I have to increase prices ... And if I don’t sell, production drops, and I have to suspend some of my employees. I feel really badly,” said Carballo, as he handed loaves to customers in the Andean city of San Cristobal.
Outside another bakery in San Cristobal, security guard Victor Martinez fretted with a friend about the measures.”This is worsening the situation. I’m scared of losing my job,” said Martinez.