If Caracas implements its plan as announced on Dec. 11, it will likely only exacerbate Venezuela's economic and social crises. Owners of 100-bolivar notes can start exchanging them at banks on Dec. 13, but they must do so by the Dec. 23 deadline the government has set. Meanwhile, 500-bolivar notes will not be made available until Dec. 15. The short time frame makes it unlikely that every holder of 100-bolivar notes will be able to exchange them in time. So, even if the government initially sticks to its strict timeline for exchanging bills, it may show some flexibility with the official deadline. Once the announcement was made, businesses across the country began refusing to accept 100-bolivar notes.

The main culprit behind the currency's woes is inflation, which the International Monetary Fund predicted would reach 470 percent this year, thanks in large part to a sharp reduction in imports and a rise in demand for dollars in Venezuela’s foreign currency-starved economy. The country's frequent consumer price increases have made the physical logistics of the 100-bolivar bill unwieldy. Just buying daily necessities, for example, requires a large stack of bills, and automated teller machines routinely run out of money several times a day. But introducing higher-denomination bills will be a temporary fix at best, since there are few means in sight of keeping inflation from hiking higher still.

The structural problems gripping Venezuela's economy, including persistent shortages of food and other basic goods, have also spurred citizens seeking financial security to buy dollars and other foreign currencies. This has driven up black market currency exchange rates, leading to even more inflation. The black market value of the dollar to the bolivar jumped by more than 300 percent over the past two months, reaching about 4,000 bolivars to the dollar. Though there are many reasons behind the currency's fluctuation, the mounting financial strain on state-run oil and natural gas company Petroleos de Venezuela and the rising public perception that the firm will default on its foreign debt (especially since it missed an interest payment in November) have likely contributed to the growing demand for foreign currency.

If the new bolivar denominations do not come into circulation quickly enough, the shortage of existing currency will worsen. A dearth of higher-denomination bills would leave lower-class Venezuelans — long a bulwark of government support — in a tough situation. If they cannot exchange the 100-bolivar bills for new bills, they will rapidly run out of options for buying the goods they need. Though the burden of carrying large wads of cash has increased the number of electronic transactions, for many Venezuelans, that payment method simply does not exist. Because most members of Venezuela’s lower classes are part of the country’s informal economy and do not have access to bank accounts, they cannot simply count on buying goods online. The government’s attempt to introduce new bills may therefore reduce the ability of Venezuela’s poorest to purchase, which could then lead to an uptick in social unrest. Without cash, it is likely that the poorer segments of Venezuelan society will turn to bartering, though the lack of currency will increase deprivation among the poor either way.

With its economy poised to continue deteriorating, 2017 will be a critical year for Venezuela. Even if the transition to the new currency denominations proves relatively smooth, the drivers of extreme inflation will remain in place. In the face of decreasing oil production, Venezuela is unlikely to get any longer term reprieve from rising oil prices, and inflation will continue to spiral upward. The Venezuelan government will probably try to consolidate power in an effort to deal with the social unrest and outbursts of violence that are likely to follow. It also will continue to engage the political opposition in talks to reduce the risk of a more coordinated protest movement coalescing. And so, as Venezuela sinks deeper into its economic morass in the coming year, the government will try to present a united front to its domestic opponents, even as the ruling party splits apart from within.