What is Venezuela’s new currency system Interbanex and what is it supposed to achieve?

But how will it work? What’s the point of it? And is it likely to succeed in its aim?

Venezuela's President Nicolas Maduro gestures as he speaks during a news conference at Miraflores Palace in Caracas (Reuters)

Venezuela’s tottering ruling regime approved a new privately-run currency exchange system this week.

It is intended to operate in parallel to the official system for changing money.

But how will it work? What’s the point of it? And is it likely to succeed in its aim?

What is the system?

The regime says a new currency platform called “Interbanex” will sell dollars for 3,200 bolivars each.

That’s lower than the official exchange rate of 2,084 bolivares to the dollar – which is the price firms and individuals must pay the state to access dollars.

It is also roughly equal to the black market rate.

Venezuela’s central bank states that the new system “will become part of the country’s currency exchange market”.

According to Reuters, Interbanex says it is owned by “Spanish investors”. And its website cites Interban Exchange, which is controlled by a Spain-registered company called Ampajesu and a Barbados-registered company called Bull Equity Management.

Why has it been introduced?

The government in Caracas has printed money on a huge scale to meet its outgoings, which has wrecked the official monetary system.

Annualised average price growth is set to hit 10 million per cent this year according to the IMF, representing one of the worst episodes of hyper-inflation in history.

Nicolas Maduro’s regime has tried to deal with this through strict price controls on firms.

The authorities have also imposed tight currency exchange controls since 2003, forcing firms and individuals to access the black market to get dollars needed to pay for essential imports.

The hope is that the new system will increase the floundering economy’s access to dollars.

Will it succeed?

There have been numerous attempts to launch “complementary” foreign exchange systems in recent years in Venezuela and they have all collapsed.

It is hard to see why this attempt will meet with a different fate, especially with the country in political turmoil. The head of the parliament, Juan Guaido, declared himself acting president last week and he has been recognised as the legitimate interim leader by a number of countries, including the United States. Britain has said it will recognise Guaido as the interim president if fresh elections are not announced shortly.

“With the dynamic the country is in, this [currency move] isn’t viable and it will make things worse,” says Asdrubal Oliveros of the local consultancy Ecoanalitica.