Venezuelans hastily dumped the country's 100-bolivar bill, the largest denomination, on Monday after the government said it would be pulled from circulation as the crisis-racked nation suffers what is believed to be the world's highest inflation. Populist president Nicolas Maduro said the withdrawal of the bill — worth just 2 U.S. cents on the black market — was needed to reduce contraband of the banknotes on the Venezuela-Colombia border.
The 100-bolivar note will be removed in 72 hours as of Tuesday, state media said on Monday, with new, higher-denomination bills due on Thursday. Despite heavy printing of the 100-bolivar bills — 2.3 billion this year alone out of 6.1 billion in total — they are in short supply. Moreover, Venezuela's shaky telecom network means card readers often collapse. Adding to the aggravation, Monday was a bank holiday, meaning there were no tellers.
Venezuelans have 10 days to exchange the notes at the central bank. While many business were not accepting 100-bolivar bills, or warning they would only do so on Monday, poor people living day to day could not afford to reject cash.
Authorities on Thursday are due to start releasing six new notes and three new coins, the largest of which will be worth 20,000 bolivars, less than $5 on the streets.
Maduro, a former bus driver and union leader elected after Chavez's death in 2013, said Colombian shoppers and organized criminals were buying up the 100-bolivar bills to go on a spending spree in Venezuela, worsening shortages of basics such as flour and antibiotics.
Venezuela is heaving under its third straight year of recession, pushing millions to skip meals and medical treatment. Many others are increasingly traveling to Colombia to find supplies. But shops across the border on Monday were displaying signs that they would not accept 100-bolivar bills, bringing business to a halt and sending Venezuelans home empty-handed.
Later on Monday night, Maduro announced in a televised broadcast that he would close the porous border for 72 hours to stem what he said was contraband of notes. His government also says businessmen are hoarding goods and bloating prices to sabotage socialism.
Interior Minister Nestor Reverol on Monday added that criminals were hoarding 100-bolivar bills in places such as Switzerland and Ukraine as part of a financial attack on Venezuela. He showed photos of stacks of bolivar bills but presented no further evidence.
Economists scoff at the official line, pointing instead at strict currency controls and price fixing that hurt imports and reduce incentives for production. They said Maduro's measure will do nothing to improve product supply.
In Venezuela, there also were logistical concerns about how authorities would remove the more than six billion 100-bolivar bills in circulation, nearly half of all coins and notes, and whether replacement bills were ready.