Venezuela implements the currency redenomination of the bolivar effective June 4, 2018

Currency redenomination

In Official Gazette No. 41.366 of March 22, 2018, Decree No. 3.332 of the president of the republic, which dictates the currency redenomination of the bolivar, was published.

This decree sets forth that, from June 4, 2018, the currency unit of Venezuela’s monetary system is redenominated to the equivalent of 1,000 current bolivars. As a consequence thereof, all amounts of money denominated in current bolivars before June 4, 2018, must be converted to the new unit by dividing them by 1,000 (in other words, by dropping three zeros from the relevant amount of money, or by moving the decimal point three places to the left of the relevant amount of money) and rounding them to the nearest cent, thereby obtaining the amounts of money denominated in redenominated bolivars. The bolivar resulting from this redenomination will continue to be divided into 100 cents.

Based on this bolivar currency redenomination, from June 4, 2018, all amounts of money in current bolivars (identified with the symbol “Bs.”) will become denominated in a new and smaller scale of bolivars under the temporary name of Bolívares Soberanos (identified with the symbol “Bs.S”), which will in the future, once it is so established through a resolution of the Central Bank of Venezuela (BCV), bear again the name of bolivars (identified again with the symbol “Bs.”).

The bolivar currency redenomination is based on the principles of nominal equivalence (whereby all amounts denominated before June 4, 2018, will be equal to the amount of money denominated in bolivars after applying the redenomination), fungible nature (whereby the references included in any means or instrument shall have the same validity and effectiveness after its redenomination) and gratuity (whereby such redenomination is free of charge for consumers and users).

The BCV will regulate all matters related to any applicable rounding as a consequence of this redenomination and, in general, all other matters related to implementing the currency redenomination and circulating the new bills and coins resulting from it.  

Legal effects of the currency redenomination

As a consequence of this currency redenomination of the bolivar, from June 4, 2018: (a) the obligations in local currency incurred before that date and which must be performed, paid or complied with on or after that date must be converted into redenominated bolivars and so performed, paid or complied with in redenominated bolivars, and (b) all obligations in local currency incurred from such date must be incurred in redenominated bolivars (and not in current bolivars).

The references to local currency included in any and all instruments, acts or legal transactions made before June 4, 2018, and which are to continue to have legal effects on and/or after that date are deemed to be automatically redenominated from June 4, 2018. As a result, there will be no need to execute or make new instruments, acts or legal transactions, or to perform actions with registries or notaries public, for the sole purpose of effecting the redenomination of those references to local currency.

The references to local currency included in any and all laws, regulations, decrees, resolutions, rules, circulars, instruments, administrative acts with general or particular legal effects, and court decisions, issued or which became effective, as applicable, before June 4, 2018, must be converted into redenominated bolivars and performed, paid or complied with in redenominated bolivars.

New bills and coins effective June 4, 2018

The BCV will issue new bills and coins reflecting the redenominated bolivars, which enter circulation from June 4, 2018, and will be deemed legal tender for all purposes from such date.

For its part, the bills and coins reflecting the current bolivars will no longer be in circulation and will no longer be deemed legal tender from that same June 4, 2018, since the same will be demonetized effective on that date.

Reference to prices and amounts of money in local currency effective May 1, 2018

From May 1, 2018, and until the BCV indicates otherwise through a resolution, all instruments whereby the price of goods and services is offered in local currency and all instruments referring to amounts of money in local currency must be expressed both in current bolivars and in redenominated bolivars (although the redenominated bolivars will not be in circulation as of that date).

Penalties

Except where there is a special provision stating otherwise, those who refuse to make the currency redenomination or fail to comply with any obligation imposed by the referenced Decree No. 3.332 on currency redenomination, thereby affecting the normal operations of the national payment system, are subject to an administrative penalty imposed by the BCV equal to 1% of their paid-in capital and reserves.