''Viernes Negro'' ( en, Black Friday) in

Venezuela Venezuela (; ), officially the Bolivarian Republic of Venezuela ( es, link=no, República Bolivariana de Venezuela), is a country on the northern coast of South America, consisting of a continental landmass and many islands and islets in th ...

refers to Friday, 18 February 1983, when the

Venezuelan bolívar The bolívar is the official currency of Venezuela. Named after the hero of Latin American independence Simón Bolívar, it was introduced following the monetary reform in 1879, before which the venezolano was circulating. Due to its decade- ...

was devalued substantially against the

US dollar The United States dollar ( symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the officia ...

. This event caused a significant destabilization of the currency and the Venezuelan economy.

Background

When

Luis Herrera Campins Luis Antonio Herrera Campins (4 May 1925 – 9 November 2007) was the president of Venezuela from 1979 to 1984. He was elected to one five-year term in 1978. He was a member of COPEI, a Christian Democratic party. Early life and career Luis ...

became President in 1979, he received a "mortgaged Venezuela". Viernes Negro in Venezuela was preceded by events such as the departure of Venezuela from the

gold standard A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from the l ...

, the nationalization of oil, and the beginning of a stage of decreasing public spending compared with State revenue. The situation worsened and was evident with the fall in oil prices that led to oil exports dropping from $19.3 billion in 1981 to around $13.5 billion in 1983 (a decrease of 30%), and the beginning of the Latin American debt crisis. These events produced a flight of capital of almost $8 billion and a corresponding decline in international reserves. President Herrera Campins also created different exchange rates for imports and exports, creating economic distress in national revenue and for transfer of goods, which contributed to the decline and ultimate devaluation.

Viernes Negro

The devaluation happened because of President

' economic policies. Following the oil price crisis, the Herrera Campins government declared bankruptcy to the international banking community and then enacted currency restrictions. The policies centred on the establishment of an

exchange-rate regime An exchange rate regime is a way a monetary authority of a country or currency union manages the currency about other currencies and the foreign exchange market. It is closely related to monetary policy and the two are generally dependent on many ...

, imposing a restriction on the movement of currencies, and were strongly objected to by the then-president of the

Central Bank of Venezuela The Central Bank of Venezuela ( es, Banco Central de Venezuela, BCV) is the central bank of Venezuela. It maintains a fixed exchange rate for the Venezuelan bolívar and since 1996 is the governing agent of the Venezuelan Clearing House System ...

, Leopoldo Díaz Bruzual. The currency controls devalued Venezuelan

purchasing power Purchasing power is the amount of goods and services that can be purchased with a unit of currency. For example, if one had taken one unit of currency to a store in the 1950s, it would have been possible to buy a greater number of items than would ...

by 75% in a matter of hours; banks did not open on Viernes Negro, and even the Central Bank did not have many reserves of foreign currencies, causing the government to devalue the bolívar by 100%. Controversy occurred when it was revealed that corporations were told of the restrictions in advance and began stockpiling US dollars.

Aftermath

Since then, Viernes Negro represents a milestone; the day that changed Venezuela's economic history. Before it, the bolívar had been characterized as stable and reliable since the 1910s, with its last free price against the dollar at a fixed value of 4.30:1. Since Viernes Negro, the economic situation of the nation has been tumultuous. The exchange stability of the Venezuelan currency disappeared because of constant devaluation of the bolívar, complications with the payment of external debt, the accelerated deterioration of purchasing power, and the implementation of an exchange control called "Regime of Differential Exchange" () — operating from 28 February 1983 to 10 February 1989, and marked by serious cases of corruption during the government of

Jaime Lusinchi Jaime Ramón Lusinchi (27 May 1924 – 21 May 2014) was a Venezuelan politician who was the president of Venezuela from 1984 to 1989. His term was characterized by an economic crisis, growth of the external debt, populist policies, currency dep ...

References

{{reflist, 30em 20th-century economic history 1983 in Venezuela Economic history of Venezuela Pages with unreviewed translations

Background

Viernes Negro

Aftermath

See also

References