The consumer price index in Venezuela finally stood at 193% during 2023, a little lower than expected, according to figures offered by the Venezuelan Observatory of Finance. The inflation index for December (3.9%) and November (1.9%) are the lowest recorded by the Venezuelan economy in many months, after a prolonged hyperinflationary period that the Government of Nicolás Maduro has never recognized.
Data from recent months suggests that price growth has lost momentum. The annual average of inflation in 2023 remains the highest in the world, but everything indicates, according to experts, that more moderate levels are approaching, accompanied by a certain economic expansion. Even other countries such as Lebanon or Argentina are on their way to surpassing Venezuela, which for years remained in first position and had annual inflation of several thousand percent. Henkel García, finance specialist and director of the Albusdata firm, predicts that inflation in 2024 will only be double digits, a milestone for the country's battered economy in recent years.
The figures from the OVF – a specialized monitor that analyzes the behavior of the national economy, trying to fill the official information gap – indicate that the most critical month of 2023 was January, with 39.4%; followed by February, with 15.4. The trend tends to be downward, except for a high peak in August, with records already significantly low in the last quarter. “Although it is still very high, it is the fifth year in a row of declining prices in the country,” says the OVF report, which in 2022 placed inflation at 305%.
“The behavior of the Venezuelan economy was generally a little less traumatic in 2023,” says economist and consultant Antonio Paiva, who attributes part of the responsibility for the slowdown in prices to dollarization. “People run away from bolivars, everyone wants the possibility of earning in dollars, they look for immediate conversion to get out of the local currency as soon as possible. Supply has improved significantly, there are enormous investments in the commercial sector, but there are still serious problems for the average citizen; “The deterioration of salaries is alarming and public services have collapsed.” The stability in oil production that the Chevron license has generated has also helped.
During the first seven decades of the 20th century, with single-digit month-on-month rates and high economic growth, Venezuelans did not really know what inflation was. The deterioration began to become evident around the 1990s, as democracy cracked amid corruption scandals and erroneous public policies. In 1996, a serious financial crisis in private banking produced an average monthly inflation rate of more than 100%, until then, and for a long time, the highest the country had experienced in its entire history.
The death of Hugo Chávez, in 2013, and the arrival to power of an inexperienced and radicalized Nicolás Maduro, set the scene for an economic storm of historic dimensions. The crisis ended the country's salary and social guarantees in a systemic framework of corruption, draconian control over private companies, anarchic salary increases, an aggressive nationalization policy, a permanent questioning of the legitimacy of private property and a control maintained changes that produced the bankruptcy of Petróleos de Venezuela and a monetary and fiscal imbalance so extreme that from 2014 to 2018 there is still no agreement among economists on the number of zeros that the increase in prices accumulated each year.
Once the total bankruptcy of the economy had materialized, around 2019, the Chavista Government of Maduro undertook a silence and progressive return to the domains of the market economy to stabilize the country. Dollars were admitted and decriminalized; the conflictive discourse against capital ceased; “the bourgeoisie” was no longer held responsible for the increase in prices, and a classic anti-inflationary strategy was developed, with great discretion when it came to increasing salaries, led by a group of Ecuadorian advisors who work closely with the vice president of the Republic. , Delcy Rodríguez.
“Inflation has subsided due to an undecreed economic adjustment that has had a devastating effect,” comments Leonardo Vera, professor at the Central University of Venezuela and member of the Venezuelan Academy of Economics. “The three pillars of its deceleration have been the salary freeze; the legal reserve that has curtailed bank credit; and the attempt to anchor the exchange rate, which has made imports cheaper and domestic products more expensive.” Like Paiva, Leonardo Vera believes that dollarization has had a key effect on the increase in prices.
After spending years without publishing anything about the state of the economy in the midst of the supply crisis and price increases, the Central Bank of Venezuela – until the arrival of Chavismo to power, an institution respected for its precision and fairness – has begun to publish , selectively and filtered, some information about the situation of the nation's finances.
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