Venezuela is in turmoil. Even the official United Nations news agency noted “The UN refugee agency says that the “majority” of Venezuelan’s leaving their crisis-wracked country need international protection.”
Last month we noted that The New York Times indicated U.S. sanctions against Venezuela would cut off the Central Bank of Venezuela from international financial transactions, but the Trump administration claimed to exclude payment cards as a humanitarian gesture. That is an important point. Branded payment cards would be excluded to allow people to buy life essentials such as food, healthcare, and transportation.
Sputnik, a Moscow-based news bureau, reported the Central Bank of Venezuela announced Mastercard and Visa would not be accepted in the troubled nation by the end of January 2020.
PaymentsJournal is certainly not the forum for political discourse, but the country is in economic shambles; the Washington Post reports the inflation rate to be 1.27 million percent. That is not a typo: 1,270,000%. The LA Times reports the cost of a dozen eggs is $160.
Caracas based Globovision reported (in Spanish)
- Through a joint resolution, the Central Bank of Venezuela (BCV) and the Superintendency of Banking Sector Institutions (Sudeban) indicated they plan to develop a domestic transaction processing network that dispenses with the agreements with the Visa and MasterCard franchises and the Maestro system.
That’s good news/bad news. Payment brands will not be affected by the change but no one likes to see a country fail. Not having a functional international card system in a nation is certainly a weak point. Sudeban’s mention of a domestic payment system might help the market get back on their feet though one does not just snap their fingers and have a viable process. Payment cards are more than just plastic.
There are successful models around the world where domestic payment schemes work, but economic recover needs to be in the BCV’s equation. Life was easier with the King of Calypso. There is plenty of work ahead to get the country on course. Good luck to Sudeban. Pedal quickly!
Overview by Brian Riley, Director, Credit Card Advisory Service at Mercator Advisory Group