Maduro’s 3% Dollar Tax Is Pushing Venezuelans Back Into Bolivars

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For years, the bolivar drifted toward irrelevancy as Venezuelans embraced the economic stability brought on by the widespread use of the U.S. dollar, Bloomberg News reported. But the Socialist regime, always reluctant to fully turn its economy over to the dollar, is now making a surprise bid to revive the local currency. Emboldened by surging oil exports that are fueling economic growth and helping keep the foreign-exchange rate steady, the government is pushing Venezuelans to use the bolivar more by slapping a 3% tax on purchases made with dollars in shops, restaurants and grocery stores. One study done by a private firm indicates there was a slight shift away from the dollar in the days after the tax took effect. A separate report released Tuesday found the use of bolivars in Caracas rose sharply in April, the first full month after its introduction. The move is a sign that President Nicolas Maduro is increasingly confident the economy is on solid footing after a series of free-market reforms and that Venezuelans believe his government will manage to prevent a return of the kind of hyperinflation that ravaged the country for years. But it’s a high-risk strategy that could backfire given the length and depth of the economic collapse -- the worst in the Western Hemisphere in decades -- and the tepidity of consumer and investor confidence. Read more.
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