Venezuela devalues the bolivar by 95% and pegs it to ‘oil-linked’ cryptocurrency
businessinsider.com
businessinsider.com
'Pegging' currencies is a problem, because the country loses monetary policy controls, but maybe they're smart enough to realize that's the problem in the first place ... it's smart to peg it to something petroleum based as the economy is effectively based on that. Perhaps it's a desperate attempt to restore faith in the currency, i.e. it's 'crypto' and can't be tampered with, and attached to something rational.
This might actually be the first hard case use for a good crypto: to basically provide 'integrity' wherein the underlying political system has none ... of course, the only way it can work is if the regime has enough self awareness to recognize this and accepts the limitations of the crypto, and the fact it's an admission that they are so incompetent that they screwed up the entire economy and currency.
Of course, any smaller nation may still very well simply opt to use USD as it's considerably more liquid and just makes more sense for so many reasons, political populism aside.
On the other hand, all the debt that was issued in bolivars is basically void since a loaf of bread is now worth more than several millions bolivars. All savings are lost, pensions are worth nearly nothing and anyone who trusted the Venezuelan government by buying bonds and/or financing their projects by lending bolivars is fucked.
This moves allow Venezuela to technically erase around 1/3 of it's debt, hoping that will allow them to not default on the part that is due in foreign currencies, but scarifying it's own population in the process. Fun times.
If you could produce so much oil, then you wouldn't have the debt in the first place.
So the debt actually went up by the Bolivar devaluation, because now Venezuelans must create 20 times the value they created before in order to repay the debt.
The issue comes from the fact that during the last weeks/month, oil production has significantly dwindled due to political turmoil. Instead of defaulting on the foreign debt, they sacrificed their own population.
They do not need to create 20x the value they created before. The USD price of a Kilogram of coffee did not change at all, so any amount of coffee they would be selling now will contribute the exact same amount towards foreign debt reduction than the same amount produced 3 month ago: they don't suddenly need to produce 20x more.
On the other hand, if they did sell a significant amount of coffee 3 month ago and saved the profits in bolivars for their old days, or to invest in modernising the farm, their savings just got divided by 20.
Also, renovation of the Venezuelan infrastructure was paid for but not accomplished (graft/corruption). So they're in a hole for efficient production?
Finally, food production: they divided up farms and gave small holdings to the workers, who unfortunately had not the education, equipment nor capital to run them. So food supplies tanked, resulting in foreign exchange being used principally to import food.
All this added up to, a total fail of the regime to pay for their socialist experiment? Never mind games with imaginary points (currency valuation). The country can't feed itself nor make its own food nor trade its resources for food. They're in a big hole.
They just need to switch to a working version and they should be good.
/s
[1] https://www.merriam-webster.com/dictionary/social%20democrac...
If you use the real definition of socialism, you might as well say "the US should not adopt Nazism" as "the US should not adopt socialism" because both are equally likely to actually be adopted (i.e. not very likely at all). No mainstream politician in the US is suggesting that the state should take over ownership of most private businesses.
Not true. Especially not in Europe.
> hit that Merriam-Webster link in the parent
Unfortunately, Merriam-Webster has it wrong in this case. Social democracy is not a synonym for democratic socialism. The two are very different ideologies with very different goals. As stated in the Wikipedia article for social democracy (with accompanying references):
"Social democracy is a political, social and economic ideology that supports economic and social interventions to promote social justice within the framework of a liberal democratic polity and capitalist economy... Social democracy became associated with Keynesian economics, state interventionism and the welfare state, while abandoning the prior goal of replacing the capitalist system (factor markets, private property and wage labor) with a qualitatively different socialist economic system... By the post-World War II period, most social democrats in Europe had abandoned their ideological connection to Marxism and shifted their emphasis toward social policy reform in place of transition from capitalism to socialism." [emphasis added]
Contrast this with the article for democratic socialism:
"Democratic socialism is further distinguished from social democracy on the basis that democratic socialists are committed to systemic transformation of the economy from capitalism to socialism, whereas social democracy is supportive of reforms to capitalism... As socialists, democratic socialists believe that the systemic issues of capitalism can only be solved by replacing the capitalist system with a socialist system—i.e. by replacing private ownership with social ownership of the means of production."
In summary, social democracy grew out of a movement that advocated transitioning from capitalism to socialism, but ultimately rejected such a transition in favor of working within a capitalist economy. Democratic socialism, on the other hand, advocates for the abolition of capitalism and private property. It does not reflect the present policies of Denmark and Germany, given that neither intends to abolish private property and transition to a socialist economy.
Two of our four major parties (the NDP and the Parti Québécois) officially adheres to a Democratic Socialist policy [1]. Sure they've not had a turn at governing though they've been the official opposition, and the NDP is currently in charge of the Alberta government. They're not some fringe party. Their platform overlaps heavily with the ruling Federal Liberals - and they're both considered "centre-left" parties.
Second, even if the NDP and PQ adhered to democratic socialism, that would not mean Canada is democratic socialist. The fact that the Conservative Party adheres to conservatism, for example, does not mean Canada is conservative.
Third, Canada is not democratic socialist because democratic socialism is incompatible with capitalism. Democratic socialists are committed to the systemic transformation of the economy from capitalism to socialism, including the elimination of private property. There is simply no realistic chance of Canada transitioning to a socialist economy and eliminating private property in the foreseeable future. This doesn't mean it couldn't happen eventually, just that it is not feasible under Canada's current political climate, government institutions, and legal framework.
PS: Did you mean to refer to Bloc Québécois (the federal party) rather than Parti Québécois (the provincial party)?
Previously Canada has had and spun off: Nationalized petroleum company (PetroCanada), package delivery company (Purolator), freight rail network (CN), airline (Air Canada) and aircraft manufacturer (Canadair).
I feel the reason many people don't associate Canada with 'real' socialism is that I feel socialism in Canada is a pragmatic and not idealistic decision in many cases. It's a massive country and as a result it's not economical to provide many essential services. These services are pragmatically socialized, and once they become profitable to operate as businesses are spun off as was done with the aforementioned.
[1] https://en.wikipedia.org/wiki/Crown_corporations_of_Canada
[2] https://www.thestar.com/business/2018/08/09/ontario-power-ge...
(Using the definition "a democratic welfare state that incorporates both capitalist and socialist practices")
Not at all, case in point: We are having a political discourse and people don't consider it interchangeable.
Most industry in Venezuela is privately or publicly owned.
Venezuela also is not by definition a socialist country, it just has a socialist party whose goal is socialism. There still is a relatively strong opposition.
According to the Canada 2006 Census, 316,350 Canadians reported American as being their ethnicity, at least partially. There are also between 900,000 and 2 million Americans living in Canada, either as full-time or part-time residents. [1]
According to U.S. Census estimates the number of Canadian residents was around 640,000 in 2000. [2]
According to Stats Canada, the trend has reversed over time as the absolute number of Canadians living in the US peaked in 1930 at 1.3MM, which would be about 12% of the Canadian population at the time, down to a current 1.8% [3] On the other hand, Americans in Canada acount for 0.66%. At most it's a 3X discrepancy, not 10X, and it's largely due to the draw of the US economy. What would be more interesting to me, IMO, would be how many return home.
By all means, have at them windmills though, at least you've got a good view from on top that high horse ;)
[1] https://en.wikipedia.org/wiki/American_Canadians
[2] https://en.wikipedia.org/wiki/Canadian_Americans
[3] https://www150.statcan.gc.ca/n1/pub/11-008-x/2010002/article...
The socialism in Venezuela is also of the crazy-left type, not even remotely as in Denmark or Germany.
> Venezuela produces extra-heavy crude oil in the Orincoco Oil Belt area and heavily relies on imports of lighter liquids (diluents) to blend with this crude oil to make it marketable. Financial difficulties recently have occasionally prevented the state-owned oil company, Petroleos de Venezuela SA (PdVSA), from importing the necessary volumes of diluent to sustain production and exports.
It's funny because 'stability and predictability' alone would yield them the kind of business climate and interest rates they would need to attract investment and they'd be much richer as a result.
Mexico, Brazil, Argentina and Colombia proves that your point is not right.
How so?
If they were like Japan, or Germany, or Sweden - they would get tons of investment.
Canada is the 'other country' that has vast Oil Sands and we get billions invested to extract it. The volatility is only in the market demand side, not the geopolitics side.
[1]: "Some statistics on this page are disputed and controversial. Different sources (OPEC, CIA World Factbook, oil companies) give different figures. Some of the differences reflect different types of oil included. Different estimates may or may not include oil shale, mined oil sands or natural gas liquids."
https://en.wikipedia.org/wiki/Oil_shale_reserves
https://en.wikipedia.org/wiki/Oil_shale_economics
Even with conventional oil, though, 11th place worldwide seems reasonable, particularly compared to neighboring countries (behind Nigeria and ahead of Kazakhstan, China, and Qatar). Don't forget that the U.S. still has very active oil production in Alaska, Southern California, Texas/Oklahoma, and the offshore Gulf of Mexico.
[0] https://tradingeconomics.com/venezuela/crude-oil-production
One thing I find interesting is that Venezuela might have the number 1 oil reserves, and that's repeated over and over. Their oil is garbage (extremely heavy) and requires the importation of dilutants paid for by foreign currency, as well as equipment and specialized engineers that are paid for by foreign currency as well. If the prices of oil are too low, it doesn't matter how much oil is under the land they're sitting on. It's going to stay there until kingdom come.
The 95% devaluation doesn't really change anything - unless you were specially connected, you couldn't change bolivars for USD at the official exchange rate. At most this devaluation just brings the official rate back in line with the black market rate, which is the real exchange rate because that's the only rate at which you can actually exchange currency.
Folks holding bolivars (and creditors, and pensioners) were already screwed. This just makes it official.
This is satire?
Total dysfunction, cronyism, corruption, dysfunction, (a lot of government debt is held by members of government!) and of course arbitrary government intervention in the economy like forcing retailers to have certain prices, nationalizing private businesses and factories willy nilly and ploughing them into the ground, fixing exchange rates etc. etc. etc..
I could go on.
Basically 'everything is wrong' with how they managed the economy.
Mass cash inflows from Oil sales can paper over a lot of problems and pay for some infrastructure, healthcare and education for the plebes (which is good), but ironically it can make the rest of the economy very dysfunctional and fragile ... but his 'red revolution' did in realtime what all the red revolutions do. How many times does this story need to repeat itself?
Chile is a better example.
Intervention in the economy was also a move employed by Chavez - who was, and still is, well loved by the country. Price control was implement so that the poor would not starve - maybe this was a good idea poorly implemented. Fast forward several years and with foreign goods becoming cheaper than what they could make in their own country = devalued Bolivar + more inflation.
Anyways, the point I was making was that it was already set in motion that their economy would crash before Maduro took power. Hence, my statement "How did Maduro's govt mess up their economy?"
Chavez set into motion that which Maduro continued and is the primary problem creator.
Chavez is only beloved by some because he had massive Oil revenues to bribe the plebes with, and he left others holding the bag of the destruction he created.
'Price controls' are a very temporary and ultimately destructive way to do anything and certainly will only guarantee more economic destruction thereby making things much, much worse for everyone especially the poor.
Maduro is responsible because he resided over the continuance and embellishment of stupidity. He could have ushered in some responsible reforms, but he did the opposite.
1) By relying almost exclusively on oil
2) By implementing price controls on staple goods to help the poor: this effectively drove whole industries out of business
3) By trying to control of the foreign exchange, preventing people from freely exchanging their money with dollars
In other words, by trying to implement a socialist government program.
By continuing Chavez' policies.
Given the incentives in place, it is hard to imagine that it could turn out anything but corrupt and incompetent. What reason do Venezuelan officials, aside from personal pride, have to execute their office faithfully and competently? What reason do they have to hire people who execute their offices faithfully (aside from to their boss) and competently?
Chavez took it because the oil execs were messing with the economy as a form of protest against taxes. A move that was highly controversial.
As for Norway, to avoid the Dutch disease they made several crucial decisions [2] early on, one of them being to encourage the development of a healthy, competitive private oil/gas sector while still retaining the majority of revenue and oil fields. They also funneled the profits into the now-famous sovereign wealth fund.
[1] https://foreignpolicy.com/2018/07/16/how-venezuela-struck-it...
[2] https://www.ft.com/content/99680a04-92a0-11de-b63b-00144feab...
Furthermore, Venezuela oil was seen as a necessity for some companies, while Norway oil was discovered at a time when there were decades of oil reserves on tap.
Some would call this well-intentioned socialism, others clientist bribery. But it doesn't really matter. What matters is that these programmes were affordable only when the price of oil was sky-high. When the price of oil collapsed a few years ago, they became unaffordable.
At this point, the government needed to make substantial cuts to the size of the state and its welfare programmes to stabilise its finances. However, such cuts are just not really possible for this kind of government: The entire basis of its power is a huge web of political patronage and self-enrichment, sitting on top of a mass of impoverished supporters. Money is the only thing that makes the system work.
Thus, the government attempted to maintain its spending through borrowing and enlargement of the money supply. Their hope was that, eventually, oil prices would rebound enough to restore the lost revenue and stabilise the economy. As they waited, their domestic and foreign opponents saw an opportunity to make the situation worse for them through measures like sanctions. However, the debt and printing of money would have lead to financial crisis sooner or later.
If they'd stuck with that things could have gone ok. There was way more disfunction and crackpot economics.
Ps. I wish I was able to write as well as yourself.
"As they waited, their domestic and foreign opponents saw an opportunity to make the situation worse for them through measures like sanctions. "
America is not an enemy of Venezuela and does not want to hurt them.
Canada is also working with the US on sanctions and here is the motivation from Gov. Canada website [1]:
"After democratic elections held in December 2015 saw a coalition of opposition parties win a majority in the National Assembly, the Venezuelan government proceeded to systematically strip the powers of the National Assembly. In January 2016, President Nicolas Maduro declared a state of emergency and has since been ruling by decree."
Tip of the iceberg.
[1] http://www.international.gc.ca/sanctions/countries-pays/vene...
In most situations, this is true. In Venezuela, however, inflation was already running at 300x a year before this announcement. (source: https://www.nytimes.com/2018/08/16/world/americas/inflation-... ). So it seems like any functional business must already essentially be operating in foreign currency.
I.e., if a debt is VB1000 before devaluation, worth about USD$100, but each bolizar is devalued by 100, then after devaluation, that same debt is still VB1000 but is now only worth USD$1. The devalued debt is now much easier to pay off.
However, if the debt had been measured in USD, it would now be 100x more expensive to pay off in terms of bolivars.
At risk of sounding inflammatory, every time someone complains about inflation, the response is "don't worry, that means your wages go up by the same amount".
Internal debts will be cut by a factor of 20, so if you owe a 5 million bolivar mortgage, suddenly that is much less money. Conversely if you have 5 million bolivars as life savings, they just became worthless.
> Mr. Maduro hasn’t specified when gasoline prices may start rising. Some of his detractors have started to call his plan a “neoliberal” austerity package that undermines the socialist ideology long espoused by his ruling party.
I'm not sure the people would stand for what's needed to fix the problem -- they know they don't want the country in the destroyed state it's in, but I'm not sure they're all on the same page on what's needed to fix it aside from "less corruption please".
For the suggestions in the top-level comments that might just apply to subsidies, though. I'm sure allowing imports, exports (and international aid...) would be broadly popular.
1: https://www.wsj.com/articles/venezuela-devalues-currency-and...
None of that would make up for all the lost equipment (to theft, to disuse, to misuse, to lack of maintenance). Nor would any of that encourage new investment (how can you trust that the government won't go back to its old bad ways?). Nor would it bring back all the population that has left for Colombia, Ecuador, and Brazil.
But all of what you said and all of what I listed, together, would be a good start. It would also help a great deal to abandon all the violent rhetoric, allow truly free and fair elections, allow the opposition to win when they do, and so on and so forth.
Argentina did all of what you said (well, they still have some subsidies), and it wasn't quite enough by itself. The primary budget deficit is still very large and the immediate driver of inflation there.
Large welfare state + underdeveloped economy + expropriation == no trust/confidence. Or, how to destroy your country in just a few steps and a just few years.
Macri's government hopes that they can slowly adjust things rather than go the shock therapy route -- if all goes well, it could work, but both approaches are risky, and it could all end badly again either way.
The black market rate is already reportedly (as of the past couple of days), 6 million - 9 million Bolivares/USD.
https://www.npr.org/sections/money/2018/08/03/635521893/epis...
Contrary to popular belief, even trotted out here on HN in about half our discussions on BitCoin, currencies are not just something that some government said somewhere is worth whatever. They need to back to something. US currency backs to the fact that the US law enforcement and potentially military (if you're big enough) will come after you if you fail to pay taxes, which, while perhaps a bit brutalist and in violation of some of our more delicate follow-citizen's tastes, turns out to be enough to keep an economy humming along.
If the Venezuelan government is incompetent enough to have that same delusional view of how currency valuation works... well... behold its results.
Like, say, backed by international oil market?
I'm sure this is just a story, but it's relevant to your comment: https://thedailywtf.com/articles/Special-Delivery
Also note: I don't disagree with you, there's no way I'd be touching a pretrodollar.
But I'd also add that there's more to backing that just saying "And this currency is backed by that." Go ahead; try it. Scribble some badlogninagain bucks down on some paper and try to get people to accept them for goods and services instead of dollars. When they complain, tell them that your badloginagain-bucks are backed by US dollars and see if that satisfies them. It shouldn't. For badloginagain-bucks to be backed by dollars, you need to be able to produce dollars in exchange for them. That's what a backing is; something you can always exchange the currency for.
Exchanging dollars for people not busting down your door and taking your stuff is certainly more abstract that exchanging it for silver, but it seems to be functional. Exchanging Venezuelan currency for Venezuelan cryptocurrency doesn't seem to be making progress. At this point my faith and credence in that government is quite rationally zero that they won't screw with something under their control, which is, you may note, concretely backed by the rest of the world by the fact that the only assets in the world worth anything are also all the assets not under their control. I'll believe it's pegged to international oil markets when it's actually stabilized the currency and people have demonstrated the ability to convert the newest bolivars into oil concretely at will.
The US currency is backed by the US economy, due to it being legal tender (i.e., form of payment) for all debts governed by US laws.
For point of comparison: the Fijian dollar is roughly half the value of the US Dollar, but Fiji has one of the smallest militaries in the world. It's value holds up because you have to spend FJD in Fiji for commercial transactions. And the EU's Euro is worth more than the dollar, despite a smaller military and more permissive legal system, because the EU has a very large economy (and the potential to be larger than the US' economy, if the Mediterranean states got their shit in order).
This is true. The demand for US currency is driven by demand to access good and services (or even to exchange to other currencies) denominated in USD.
> the Fijian dollar is roughly half the value of the US Dollar, but Fiji has one of the smallest militaries in the world. It's value holds up because you have to spend FJD in Fiji for commercial transactions.
These comparisons aren't useful. A comparison of USD to another currency would need to fully account for quantity of currency in circulation, and the liquidity (transaction volume) in exchange markets. Generally speaking, comparing currency values in USD is not useful - it can be more useful to look at purchase parity (how much it costs to purchase the same basket of goods in another country), or size of economy (e.g. measured in USD).
Edit: Another way to look at things is that it doesn't matter how much a currency is worth in USD. What matters more is the rate of change of that exchange with USD. The faster the currency devalues against USD, the less quickly market participants can adjust and effectively "price" good and services, leading to the currency's further collapse and potential abandonment for a more "stable" currency.
Basically, the Venezuelan bolívar isn't worth very much, due to a number of reasons, including rampant printing. They tried passing laws to say it was worth more, but nobody listened, because nobody outside Venezuela cares what the Venezuelan government says (and even inside the country, you can ignore the laws of reality, but it doesn't mean they'll ignore you...). So they made a cryptocurrency of sorts, backed by nothing other than people's faith in the Venezuelan government, which is basically nil, so it was also basically worthless. So they said it was backed by oil, but the only way you can "back" a cryptocurrency with a commodity like that is to just sort of promise you'll totally back it, and (see above) nobody trusts the Vezezuelan government to honour their promises, so it was still basically worthless. They they announced petro gold which was ...I don't even know, maybe a second type of petro coin backed by gold instead, but I don't think that went anywhere because (see above) nobody cares. So now they're passing a law to back the bolívar with the cryptocurrency. So...
...in other words, they're realised that a currency backed by their promises is worthless, so they're trying one backed by a promise to back it with something which is backed by their promises. Because obviously if you don't trust the government to manage the existing bolívar correctly, you'll totally trust them to manage the new one, which is pegged by fiat to a different currency, which you're also trusting them to manage, and which is pegged by fiat to an actual commodity, which you're trusting them to actually have.
Fundamentally, the whole thing is fiat all the way down. An fiat currencies can work very well when well managed by an entity which is trusted by market participants, it doesn't work here, because it's not well managed and nobody trusts anyone. Waving a hash algorithm over your fiat currency doesn't magically make it non-fiat.
(Also! A 95% devaluation is an enormous "fuck you" to anyone who actually still trusted the current Venezuelan government, and will have ensured that any trust that did somehow still remain is now gone. All existing currency, savings, pensions, many contracts, etc., have just been ripped up. And now they're saying "right, now that we've totally screwed anyone who trusted us before, now just trust us when we say that this time, this paper is actually backed by some magic crypto which is actually backed by some oil, totes legit." This couldn't have worked before today, but it double extra can't work now.)
wasn't that already done by the hyperinflation?
https://www.aljazeera.com/news/2018/02/venezuela-petro-crypt...
Which leads to more questions: (0) The purpose of Bitcoin, and by extension blockchain-based currencies, is "an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party" (Nakamoto, 1998). Third parties such as payment processors and governments. How does the Venezuela petro relate to this purpose?
(1) Bitcoin, Etherium mining is continuous to process transactions. Each time a transaction clears, there is some mining required, as the blockchain is changed. In contrast, this indicated that the "petro" was "pre-mined" by the Venezuelan government. How is petro BOTH a cryptocurrency based on blockchain AND "pre-mined"?
(2) What is the process for redeeming petro in barrels of oil? How is the currency "backed" by oil?
Trick is, people have to believe that you can and will make the exchange. If you have a whole fortress full of gold, for example, people will probably believe your pieces of paper that say "redeemable for 100 gold coins", and the value of the paper is about that of the coins. If I issue paper that says "redeemable for 1 acre of prime Manhattan real estate" you wouldn't (and shouldn't) believe it, because I don't have any Manhattan real estate.
So: how much should one believe that 1 "petro" is actually redeemable for 1 barrel of oil? Clearly they have some oil, but there's no clear mechanism yet for making that exchange. And long term, there's obviously trust issues.
We already know that this does nothing.
Venezuelan government refuses to reduce the government spending to match the government income. In fact they just announced 3,000% wage increase at the same time. No matter what the name of currency, as long as it's Venezuelan government issued currency, it's going to lose value.
There is no way this peg will hold. They just alter the way pedro is calculated or do other shenanigans.
Is there betting market for this? I want to bet several thousands against pedro/bolivar.
I seriously doubt that any bank would give out bolivar-denominated loans with fixed interest rate that is below 100%. I could take a two year debt with 10% interest easily.
Venezuelans are already earning more gold farming RuneScape than actually farming.
> Devalue Venezuela’s currency, the bolivar, by a whopping 95%. The new currency will be renamed the "sovereign bolivar."
> Instead of an exchange rate of 250,000 bolivars per US dollar, it will increase to around 6 million.
This is not a devaluation by 95%. The math doesn't add up.
> The petro is valued by the Venezuelan government at around $60, or 3,600 sovereign bolivars.
So 60 sovereign bolivars are one USD? Previously it said 6 million sovereign bolivars are one USD.
> To make things more complicated, the new sovereign dollar will also be re-denominated, which will remove about five zeros from its unit measurement.
Oh, okay. I assume they mean sovereign bolivar, not dollar (did nobody proofread this?). That makes the above point make more sense.
> At the same time, President Maduro also announced a huge 3,000% increase to the minimum wage.
> So in the new re-denominated currency, a person on the minimum wage will receive around 1,800 sovereign bolivars a month, instead of 1.8 million.
Is that 3000% increase in bolivars? In real terms? And again, I can't see the math adding up, even taking the supposed 95% devaluation.
And I haven't gone into any of the cryptocurrency stuff...
There's probably a lot of stupidity going on in this new Venezuelan policy, but that article makes a total mess of it on top of it. It's context-free reporting, by somebody who doesn't seem to care to understand what they're reporting, and the numbers just don't fit together.
The best I can make of it is:
1. The Venezuelan government still refuses to let the Bolivar float freely, which means that black market currency exchanges will continue to operate.
2. The Venezuelan government is changing the official exchange rate of Bolivar to USD.
3. The Venezuelan government is replacing the bolivar by the sovereign bolivar, where 1 sovereign bolivar = 100,000 bolivar.
4. They're increasing the minimum wage by an effective factor 100 in domestic currency. (The value of the minimum wage internationally will change by a different amount -- and not 3000% -- because of point 2, but any numbers you're getting out of the article are likely moot anyway because of black market exchanges.)
5. They're introducing some weird cryptocurrency gimmick that isn't explained properly.
Edit: And here's a Reuters article with different numbers for the minimum wage (stating a 3 mio baseline as opposed to 1.8 mio.): https://www.reuters.com/article/us-venezuela-economy/venezue...
For anyone interested, after the devaluation we still have:
Official rate: 10V to 1$ Black market: 60V to 1$
The only thing that would help Venezuela is Maduro's government falling, the socialist experiment being called off and a lot of international help.
It's not just the corruption, you can't really cap the prices for the sake of socialism and pretend that business won't fail.
https://www.businessinsider.com/venezuela-publishes-oil-pric...
The other leaders to risk doing that were Saddam Hussein and Muammar Gaddafi.
Selling oil for anything besides dollars is the real line in the sand the US will not let any country cross.
I think a more likely explanation is that Chavez instituted a number of policies that were extremely friendly to consumers and hostile to producers, with the result that the producers all left, which meant there were no goods for consumers to buy, which sent prices through the roof and instituted a (un)healthy black market.