Venezuela shuts border with Columbia to fight currency smuggling

According to a report by Torino Capital, a NY investment bank, the 100-bolivar notes accounted for over three quarters of Venezuela’s cash outstanding and 11 per cent of the nation’s money supply.

President Nicolas Maduro said that by making his country’s 100 bill illegal, he is “hitting back” against the mafia groups, who he claims have ties to the U.S. State Department, although he’s never offered any solid proof to back his claims. Venezuela gives us a fascinating – and horrifying – peek into the answer to that question in two weird, and yet unsurprising, moves.

– The Venezuelan government is to withdraw its largest banknote from circulation in its latest attempt to tackle the world’s worst inflation crisis, The Guardian said.

Critics have been quick to denounce Maduro’s decision to take the 100-bolivar note out of circulation.

The surprise move, announced by Maduro during an hours-long speech, is likely to worsen a cash crunch in Venezuela. “We have tried the diplomatic way to deal with this problem with Colombia’s government; there are huge mafias”.

“We’re intercepting about $95,000 that was crossing over, so I made a decision to close the frontier with Colombia.”, Maduro said in a radio and television announcement from Miraflores presidential palace.

The Venezuelan bolivar has been in free fall over the past few weeks, even though the government last week adjusted the wide disparity between the official and black market rates. President Marudo told the media that he has given the orders to close all land, air and maritime possibilities so those notes taken out can not be returned.

The biggest bill in Venezuela is the 100 bolivar note.

In the streets, bus stops, bakeries and shops people could be seen trying to spend their 100 Bolivar notes for any product.

“Of course, that’s where all our bolivars are going to go”, said Carlos Chacon, councilman in San Antonio on the Venezuelan side of the border.

The gangs held over 300 billion worth of Venezuelan currency, mostly in notes of 100 denominations, he added.

An estimated one-third of Venezuelans have no bank account and keep their savings in cash.

Venezuelans will then have 10 days to exchange the notes for coins and new, higher-value bills, but only at the Central Bank.

But can this decision help Venezuela which now faces economic crisis and according to the International Monetary Fund forecast will hit the 475 percent inflation rate bar by the end of this year?