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Analysis

Should You Invest In Petro ?

By Sumedha Bose

It is no secret, that Petro is probably Venezuela’s desperate attempt to stay afloat amidst US sanctions that have been levied on the country. The country’s official state backed cryptocurrency aims at solving the economic hyperinflation that is ongoing in the country. The governement has gone as far as to proposing OPEC to accept Petro as a mode of payment.

Recently, the cryptocurrency received a boost when international experts gave their approval to Petro. So amidst all the positive feedback that is in garnering in recent times, we should try to evaluate if it is actually a good cryptocurrency.

(Read the international report here)

Now the deal with Petro is that it is based  on oil and is regulated by the government. But what is important to note here is that Venezuela hardly has any significant oil reserves. That then fundamentally makes the price of the crypto extremely volatile and risky to invest in.

The Venezuelan President Maduro’s pitch regarding crypto is based on it being valuable as a combination of oil-based asset and Venezuelan government’s credibility. The Wall Street bank Brown Brothers Harriman called this out in a report where they said:

[Venezuela President Nicolás] Maduro’s comments suggest that the value of a petro should somehow be determined as a combination of oil prices and credibility of the Venezuelan government.

Now considering the country is already struggling and the government is having a difficult time getting the inflation rates down, most investors would definitely not entertain the idea of investing in an asset that is a creation of such a turbulent administration.

Another reason why investing in Petro might not be a very bright idea, is because the country’s own political opposition has claimed that Petro is not legal. Consider a situation where the already unpopular Maduro is voted out and the opposition comes into power. They will most likely ban the crypto, thereby risking all your potential investments in the crypto.

(Read more about the countries where cryptocurrency is banned)

The history of the country points to terrible situations. The socialist regimes have not allowed people to maintain their own privacy. They seized a lot of assets and that has created a situation of unrest in the society.

Venezuela is already in debt which can’t be resolved by Petro anyway. Despite some progress being made, like Petro being accepted in Vemezuelan Retail chain, the bigger picture looks grim. Already the people are starving and they are on edge about the country’s future. So investing in Petro right now might not be a very bright idea, due to its possibility of failure in the near future.

 

Sumedha Bose

Sumedha uses words as her crutch to get by in life. She takes a keen interest in debating, dancing and destroying the patriarchy in her free time. She can be contacted at [email protected].

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