Venezuela Won’t Exchange All Bank Notes in Currency Swap

(Bloomberg) -- Venezuelan central bank chief Nelson Merentes said exorbitant quantities of 100-bolivar notes would not be accepted for deposit as part of an eventual exchange into higher-denominated bills as Venezuelans throng financial institutions to protect their cash savings.

Venezuelans are racing the clock after President Nicolas Maduro’s surprise announcement Sunday that the country’s largest bill -- worth just a few U.S. cents on the black market -- would be pulled from circulation within 72 hours as part of a new emergency economic decree to fight “currency attacks.”

Banks were jammed throughout Caracas Tuesday, with long lines of customers lugging bundles of bills in backpacks and grocery bags that they hoped to deposit by Thursday’s deadline. As the first official day of the exchange wound down, the central bank president cautioned that financial institutions would only receive “rational” amount of bank notes.

“We won’t accept people arriving with trucks and carts to deposit 100-bolivar bills,” Merentes said at a news conference late Tuesday.

While government critics are quick to point to statist controls, Venezuela’s ruling socialists insist triple-digit inflation and a hard currency shortage are the result of an “economic war” launched by Maduro’s political foes, who seek to stoke discontent by spiriting bolivars out of the country. On Monday, Maduro closed Venezuela’s frontier with Colombia for three days, in what officials say is part of an effort to combat contraband “mafias” ahead of the release of new higher denominated bills later this week.

As prices have spiraled in recent years, authorities have long resisted re-denomination or issuing new notes, meaning seemingly basic transactions now require brick-sized wads of cash. Additionally, Venezuela’s strict price and exchange controls have created a thriving black market for greenbacks.

Merentes insisted that no Venezuelan would lose their savings in bill exchange as long as they could justify their cash on hand.

“The amount of bills outside of the country is incredible and even within the country there were billions of bills being hoarded by people for various reasons,” he said.

--With assistance from Noris Soto To contact the reporter on this story: Andrew Rosati in Caracas at arosati3@bloomberg.net. To contact the editors responsible for this story: Philip Sanders at psanders@bloomberg.net, Robert Jameson