{"id":1354,"date":"2018-02-22T16:49:40","date_gmt":"2018-02-22T16:49:40","guid":{"rendered":"http:\/\/baileyonlineclassroom.com\/theamericasblog\/?p=1354"},"modified":"2018-02-22T16:49:40","modified_gmt":"2018-02-22T16:49:40","slug":"venezuela-petro","status":"publish","type":"post","link":"https:\/\/baileyonlineclassroom.com\/theamericasblog\/2018\/02\/22\/venezuela-petro\/","title":{"rendered":"Venezuela petro"},"content":{"rendered":"
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WorldViews<\/a><\/div>\n
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Venezuela launches the \u2018petro,\u2019 its cryptocurrency<\/h1>\n<\/div>\n<\/div>\n
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By\u00a0Rachelle Krygier<\/span>\u00a0February 20<\/span><\/div>\n
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\nA woman walks by banners of Venezuelan bolivar notes displayed at the Venezuelan Central Bank building in Caracas, Venezuela, on Jan. 31, 2018. (Marco Bello\/Reuters)<\/span><\/div>\n

CARACAS, Venezuela\u00a0\u2014 Crisis-ridden Venezuela is launching an oil-backed cryptocurrency Tuesday that it hopes will help circumvent U.S. financial sanctions and resurrect the country\u2019s moribund economy.<\/p>\n

The pre-sale of the \u201cpetro,\u201d which will represent a barrel of crude from a specific division in the country\u2019s Orinoco oil belt, started Tuesday morning. Investors were offered $60 \u201ctokens\u201d at discounted rates that they can exchange for petros during what is being dubbed an \u201cinitial coin offering,\u201d or ICO, in March.<\/p>\n

\u201cToday is the day the petro is born. We are on the world\u2019s financial vanguard. Our response to great problems is great solutions and good will,\u201d President Nicol\u00e1s Maduro said in a televised launch event held Tuesday night in his presidential palace with media and investors. In a room set up startup-style with texts moving on screens and party-like music in the background, he said the project raised $735 million on the first day. \u201cThe game took off successfully,\u201d he said.<\/p>\n

Skeptics have expressed doubts that the currency will thrive, mainly because of lack of trust in a government whose debt is being renegotiated and whose policies have brought skyrocketing inflation. In addition, the country\u2019s once-thriving oil company, Petr\u00f3leos de Venezuela S.A. (PDVSA), is producing at its lowest levels in decades.<\/p>\n

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Some critics also say the project does not make technical sense because the government will have too much space to manipulate the coin.<\/p>\n

But proponents say that buyers may find the currency appealing because it is backed by a commodity and an administration with incentives to see it succeed.<\/p>\n

Other cryptocurrencies have experienced considerable instability. The value of bitcoin, for instance, soared more than 300 percent between August and December 2017, then plunged more than 50 percent to its current level.<\/p>\n

The first cryptocurrency officially launched by a government, the petro aims to offer a more stable option and may serve as an experiment for countries such as Russia. Moscow also faces U.S. financial sanctions, and Russian officials have recently toyed with the idea of creating a \u201ccryptoruble.\u201d<\/p>\n

Many analysts are dubious that the experiment will succeed.<\/p>\n

\u201cIt honestly sounds like they don\u2019t really understand how any of it works,\u201d Alex Van de Sande, a Brazil-based developer for the\u00a0Ethereum Foundation<\/a>, said in a phone interview.<\/p>\n

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\u201cUnfortunately, that doesn\u2019t mean it won\u2019t raise money. We\u2019ve seen terrible ideas that don\u2019t make any sense raise a lot of it,\u201d he said. \u201cIf I wanted to avoid international sanctions and make money appear out of thin air in my country hiding the origin, I guess this petro would be a useful way.\u201d<\/p>\n

Jean Paul Leidenz<\/a>, an economist at Ecoanal\u00edtica, a Venezuelan financial consulting firm, said he sees no chance that the project will inspire enough trust to substitute petros for the crumbling national currency, the bol\u00edvar,\u00a0or even pay impending sovereign and PDVSA debts.<\/p>\n

In many ways, it is designed to give the government enough space to maneuver, he said. For instance, it is not clear whether or how buyers will be able to claim rights over the barrels of oil that back the currency, or whether the coins will work as bonds for which holders will be paid once they want to cash their money out.<\/p>\n

\u201cThe government may still get millions of fresh dollars from Russian and Arab investors,\u201d Leidenz said. \u201cBut from that to succeeding as a currency? I don\u2019t think so.\u201d<\/p>\n

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Indeed, many issues may erode the petro’s credibility. Venezuela\u2019s opposition-led National Assembly has called the project illegal, arguing that oil assets cannot, by law, be sold and that the currency is a form of debt that has to be approved by the legislature. Maduro, however, has ignored the institution for years now.<\/p>\n

The U.S. Treasury Department also recently told Reuters that buying petros could be seen as \u201can extension of credit to the Venezuelan government,\u201d which could violate sanctions and expose U.S. citizens to \u201clegal risks.\u201d<\/p>\n

But Mati Greenspan, senior market analyst at social trading network eToro, told The Washington Post in a phone interview that he thinks the petro does have good prospects.<\/p>\n

\u201cIt\u2019s a milestone \u2014 an extremely exciting project that has a great chance of working, and is definitely better than continuing with the status quo,\u201d he said.<\/p>\n

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