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President Nicolás Maduro plans to “politically declare” the end of the hyperinflationary process, which began in November 2017 and will have lasted for 49 months by the time its extinction can be made official. Experts agree that if the December figures maintain the single-digit inflationary trend of recent months, it will be possible to declare the end of the period, but they do not predict that it implies a more positive scenario for the Venezuelan economy.
Venezuela would leave behind at the beginning of 2022 the hyperinflationary process that began in November 2017, when inflation figures above 50% were recorded for the first time in a single month, ending, according to official numbers, the second longest period of hyperinflation of the country’s history, 49 months, and only surpassed by the 63 that Nicaragua lasted between 1986 and 1991.
“I can declare politically, with the result of the inflation management between the months of September, October, November and December, which has been one digit with a downward trend, that Venezuela leaves the state of hyperinflation,” he celebrated on Saturday President Nicolás Maduro during an interview with the Spanish writer Ignacio Ramonet broadcast on the Telesur channel.
The figures of the National Consumer Price Index (INPC), the official inflation meter at the Central Bank of Venezuela (BCV), have remained in one digit since September, and have not exceeded 50% since December 2020, when they stood at 57.5%.
According to the INPC, inflation in November 2021 in the country was 8.4%; while October registered 6.8% and September 7.1%.
This index differs slightly from the one calculated by the Venezuelan Finance Observatory (OVF), a body of the former National Assembly with an opposition majority that was created to provide data on economic activity that contrasted official figures.
The OVF reported hyperinflationary figures for the last time in February 2021 (50.9%), with which it would be in February 2022 that it would officially declare the end, according to the most universally accepted thesis, that of economist Philip Cagan, according to the which can only be considered concluded a process of hyperinflation after 12 months in a row with numbers lower than 50%.
Fiscal and monetary discipline: the keys to stabilizing prices
Going shopping in Venezuela, be it of any type of goods, is an adventure of unexpected outcomes. A product will never cost the same as the week before, even many times the same as the day before. In the months of hyperinflation, the price escalation remained above any possible adjustment or forecast.
For the economic analyst Jesús Casique, the end of hyperinflation, which can only be declared once the BCV’s December figures are published, was based on the de facto dollarization of the economy, on the one hand, and on fiscal discipline and monetary, on the other.
“The Venezuelan economy is 66% dollarized, the price of any type of goods is calculated in dollars,” says Casique. “According to the theory of expectations of economic agents, a price adjustment occurs if the currency is considered to be overvalued. The market has already made this adjustment, probably in August or September, to hedge against the December scenario, and that it has taken pressure off prices in recent months. “
Casique also points out that the Government has reduced monetary liquidity and decreased the monetization of the fiscal deficit, following more rigorously the constitutional provision that prevents subordinating the Central Bank to the Executive, and expressly prohibits the BCV from validating or financing fiscal policies. deficit.
Economic problems in Venezuela continue
The economist José Guerra, former deputy and one of the directors of the OVF, warns that the end of hyperinflation will not mean a closure for the instability of prices in Venezuela: “We are going to technically get out of hyperinflation, but an inflation figure of 6 or 7% per month is very high, maddening, “he indicates.
“The BCV has lost almost 600 million dollars of (international) reserves in 2021, because the Government is selling dollars to stabilize the exchange rate and thus reduce the pressure on prices, but that policy kills the economy. There is no credit and therefore there is no demand and the economy remains paralyzed, “says Guerra.
His appreciation contrasts with that of Maduro in the interview with Ramonet on Telesur, where he assured that Venezuela entered 2022 with “growth and generation of wealth.”
It will be necessary to see in the coming months if state policies are sufficient to achieve a regulation of the national economy, after years of one of the deepest crises that Latin America has witnessed.
With EFE
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