Venezuela to Introduce Local Currencies

by Gregory Wilpert – Venezuelanalysis.com

Venezuelan President Hugo Chavez at a Center for ideological formation, where he announced the idea of introducing local currencies in Venezuela. Credit: ABN

Caracas, March 30, 2007

Venezuela’s President Hugo Chavez said yesterday that his government would like to introduce local currencies in communities, so as to help their development and to alleviate poverty. Local currencies would allow people to exchange goods and services without needing the national currency to enable such transactions.

Chavez said such currencies “can improve life and above all for the construction of a new social, economic, and political system” by creating an “alternative system of commerce.” Such systems have been applied in many places, according to Chavez, such as “in northern Brazil and in some localities of Mexico.”

Such as system would allow “the poor to possibility of acquiring products via exchange with an intermediary currency that could circulate, for example, in a determinate territory or would have validity for a determinate time,” explained Chavez.

The implementation of local currencies would require a set of rules, said Chavez, which could be passed as a law-decree, under the enabling law, according to which Chavez may pass law-decrees for 18 months, beginning in January of this year. Chavez asked Vice-President Jorge Rodriguez to present a law proposal for this project.

Local currencies have been used in many parts of the world, often in times of economic crisis or in areas with depressed economic activity. In addition to Mexico and Brazil, they have also been used during Argentina’s economic crisis, in the U.S., and in Europe.

The best known example in the U.S. is the “Ithaca Hour,” in Ithaca, New York, which establishes that one hour of work is equal to one Ithaca Hour. The currency is issued locally every time someone provides a service for someone else. As such, it does not require an influx of money from outside the community for transactions within the community to take place and ensures an equal hourly wage, no matter the type of work. Also, such a system can make inflation and inequality based on capital ownership practically impossible.

In Britain, Australia, and in many other countries around the world similar systems, which are not necessarily based on one hour of labor, are known as “Local Exchange and Trading Systems” (LETS).