What Was the Venezuelan Bolivar (VEB)?
VEB was the currency abbreviation for Venezuelan bolivar, which was that country's currency between 1879 and January 2008. The currency in use from 2008-2018 was the bolivar fuerte (VEF), which translates "strong bolivar" in English. In 2018, the bolivar soberano replaced the VEF. Some of the nicknames for Venezuelan bolivar currency are the bolo or the luca.
- The Venezuelan bolivar (VEB) was the former national currency of Venezuela before being replaced by the bolivar fuente (VEF) in 2008.
- Venezuela's currency has experienced periods of instability and hyperinflation due to economic and political troubles that have plagued the country in recent years.
- Venezuela's government has proposed a new currency called the soberano as well as a supposed oil-backed cryptocurrency known as the petro in response to continued currency weakness.
Understanding the Venezuelan Bolivar
Due to the inflationary devaluation of the VEB, the replacement currency saw funding at a rate of 1000:1. In August 2018, the government further devalued the bolivar by 96%. This action has sent a panic through the population as they tried to access funds through ATMs.
The Venezuelan bolivar (VEB) was made up of 100 céntimos. This currency initially drew its basis from the silver standard where one bolivar equated to 4.5 grams or 0.1575 ounces of fine silver. The money remained valued on the silver standard until the gold standard came into operation in 1910. In 1934, the bolivar became fixed to the U.S. dollar at a rate of 3.914 bolivar to 1 U.S. dollar.
The currency remained very stable compared to others in the region until the 1970s, when rampant inflation began to erode its value and forced the change to the new bolivar fuerte (VEF) currency.
VEF is currently used as the official Venezuelan currency code, but the use of the VEB symbol is still common in practice.
VEB and Venezuela's Black Friday
At one time the Venezuelan bolivar (VEB) was seen as a stable currency. However, a fall in the price of oil and reduced exports damaged the country's currency. By 1983, with a central bank nearly empty of foreign exchange reserves and mounting debt, the president devalued the currency by 100%. Banks remained closed as the population scrambled to exchange the VEB for U.S. dollars. Known as Venezuela's Black Friday, the government declared insolvency and banned the public from purchasing dollars. Inflation skyrocketed and brought the VEB to its knees, forcing the change to the bolivar fuerte (VEF).
The VEF was somewhat volatile in the global currency exchange market. Much of the VEF’s limitations originated because the Venezuelan government began putting strict controls on their currency in 2003 to limit individual’s access to dollars further. As inflation continued to devastate the Venezuelan economy, the government and central bank decided to redenominate its currency again. In 2018, the bolivar soberano or sovereign bolivar (VES) replaced the bolivar fuerte.
Due to the high rate of inflation in Venezuela, the demand for U.S. dollars has increased. Without access to the dollar, however, the currency rate can increase with black market activity.
In 2018, due to currency instability, the Venezuelan government announced a proposal for an oil-backed cryptocurrency system to operate alongside paper notes and coins, called the petro. The government claimed that a February, 2018 pre-sale of the petro drew in $735 million in investments on the first day.
The validity of these claims are yet to be verified. A September 2018 Reuters report claimed that the cryptocurrency was yet to take off, much less compete with the traditional monetary system. The publication investigated the coin and found little evidence that it was being used in mainstream society. What’s more, there’s reason to believe that the blockchain underlying the petro is still under development. Others have leveled allegations that the "crypto" isn't even a cryptocurrency nor is it backed by oil or anything else of value.