16:22 GMT +320 October 2018
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    Venezuela's President Nicolas Maduro (File)

    Scholar: Venezuela's Petro 'Failed Project From the Beginning'

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    With Venezuela’s hyperinflation reaching record levels, it seems that months after the re-election of President Nicolas Maduro, the economic crisis is still crippling the country. Sputnik spoke with Dr Jairo Lugo Ocando, Lecturer in Journalism at the University of Leeds for more on the country’s hyperinflation and its oil-backed cryptocurrency.

    Sputnik: What has caused hyperinflation to soar this high?

    Dr Jairo Lugo Ocando: It’s mostly caused by the use of inorganic money that means the use of additional money that is not backed by the international reserves of the country. It’s a traditional example of hyperinflation caused by the government spending excessively without the necessary backups.

    Venezuelan banks have stopped publishing statistics; but from the most recent ones you can see an exponential growth in the production of money, in this case the Bolivar, which does not correlate with oil production or GDP.

    Producers of products also have to account for the uncertainty in the market, so you have to make a profit and then refill stock. With hyperinflation you can sell a product and find that the price has fluctuated by 20% in one afternoon, so this poses massive problems for the country.

    READ MORE: India Declines to Buy Venezuelan Oil With Petro Cryptocurrency Despite Discounts

    Sputnik: Has the petro failed or is it too early to say?

    Dr Jairo Lugo Ocando: It’s completely failed and was a failed project from the beginning. Block chain technology has to generate confidence and the parties must know how much is being exchanged. In the case of the Petro, it’s the government backing it with oil, so it’s not really like Bitcoin.

    It is the admission of an alternative currency by the government that demonstrates the failure. There will be a new type of Bolivar that will be backed by gold reserves, so they are destroying a lot of areas of the rainforest to satisfy the demand of a central bank that is basically bankrupt.

    The views and opinions expressed in this article are those of the speaker and do not necessarily reflect those of Sputnik.

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    hyperinflation, Petro, Venezuela
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