Will Venezuela be able to solve part of its economic problems by introducing this new cryptocurrency, the petro?
The problem is multifaceted.
First VZ is having problems producing oil with power outages, poorly infrastructure and lack of investment going in for years. It’s really too bad because VZ has the potential to be just as rich as Saudi Arabia judging by proven oil reserves the country has.
Second, there are US sanctions around parts of the economy such that even if VZ had a good oil output it would still suffer immensely. The difficulty in international trading due to the sanctions lead to distorted prices and inflation for necessities.
Third, inflation can reflect currency mismanagement but is not always the case. In this case it is equally possible VZ’s socialism mode of production is highly inefficient, causing supply shortages, which will not be solved by a new currency.
In general, forming a new hard asset backed currency can work to reduce inflation, see Weimar Germany and more recently Zimbabwe, but this doesn’t solve the inefficient production economy in the country nor does it guarantee oil will flow. Investment going in today will take 3-5 years before having an output. If the currency has sound fundamentals it will work, crypto or not. The fact its crypto actually means it is slightly less secure due to cybersecurity concerns and comes across as a little desperate to latch onto the crypto craze, and is late to the party.