2 Bolivars – Venezuela

In 1989, Venezuela's currency situation was defined by a profound crisis stemming from the collapse of the petro-state model. Following the 1970s oil boom, the country had accumulated massive foreign debt during a period of high oil prices. When global oil prices plummeted in the 1980s, Venezuela's economy contracted sharply, leading to severe balance of payments problems and a drastic depletion of international reserves. By the late 1980s, the bolívar was widely considered overvalued and subject to strict exchange controls, creating a vast gap between the official fixed rate and a thriving black market for US dollars. This disparity crippled the economy, causing widespread shortages of imported goods and fostering capital flight as confidence in the national currency evaporated.

The situation reached a breaking point shortly after President Carlos Andrés Pérez took office in February 1989. Facing pressure from the International Monetary Fund (IMF) to secure loans, his government launched a dramatic neoliberal reform package known as "El Paquetazo." Its most shocking element was a sudden and massive devaluation of the bolívar, moving from a heavily subsidized fixed rate to a free-floating "market" rate. Overnight, the currency lost over 100% of its value against the dollar, leading to an immediate and catastrophic surge in the price of all imported and essential goods, including food and medicine.

This abrupt currency devaluation acted as the direct trigger for the "Caracazo" – a spontaneous, massive wave of riots, looting, and violent protests that swept through Caracas and other cities from February 27th. The social explosion was a direct response to the eradication of purchasing power for the vast majority of Venezuelans, plunging a formerly middle-class nation into sudden, brutal poverty. Thus, the 1989 currency crisis was not merely a financial event; it marked a pivotal historical rupture, shattering the social contract of Venezuela's democratic era and setting the stage for decades of subsequent political and economic instability.