After a historic hyperinflationary storm in Latin America, which unleashed an unprecedented price disorder that destroyed the economy starting in 2016, price indices in Venezuela are finally beginning to lose ground. The Central Bank tables average a rate of 3.2% in the month of November, the lowest in many months in the country, continuing an evident decline in October and September.
With these steps, Venezuela is on its way to giving up first place in the classification. The current annual average stands at 185%, still tremendously high, but far from the crazy years of 4,000% and 6,000% in 2016 or 2017.
The experts consulted, such as Henkel García, director of the consulting firm AlbusData, assure that, if the political conflict does not get out of hand – which remains to be seen -, the country could finally end 2024 with a double-digit inflation rate.
After 2023 with a modest growth rate, an expansion of the economy is also expected in 2024 thanks to a recovery in tax revenue due to the removal or relaxation of energy sanctions by the United States. Francisco Rodríguez, an academic at the University of Denver, estimates that the range of GDP expansion may be between 2 and 6 percent. Some make even more optimistic calculations.
A hostile policy of nationalization together with the tightening of exchange, fiscal and commercial controls, promoted by Nicolás Maduro when he assumed functions in the Government in 2013 to continue the legacy of Hugo Chávez, in addition to widespread corruption in almost all its instances, produced in 2014, an exchange debacle that worsened the shortage and a serious drain on foreign currency in Venezuela.
During almost the entire 20th century, the country had enviable exchange rate stability, lasting several decades and, until 1980, some of the lowest inflation rates in the world. The international sanctions applied by the United States, the European Union, and other actors to the Maduro Government ended up aggravating the storm created by Chavismo and tied the hands of the Executive, also precipitating the collapse of Petróleos de Venezuela (PDVSA), the state oil company already eaten away by corruption.
“After a hard adjustment of almost two years, inflation finally subsides. Society has paid a very high cost to mitigate this phenomenon because the adjustment carried out by Maduro has been very contractionary and has greatly hurt the quality of life of employees,” says economist Leonardo Vera of the Central University of Venezuela.
Vera points out that inflation is subsiding because – unlike what was done in the years 2014-2015-2016, in which cheerful salary increases were decreed without a fiscal basis – the Government of Nicolás Maduro has been careful not to make the same mistake and The salary scale, currently the lowest in Latin America, has not changed.
“The banking reserve, which remains at 73%, and which must be the largest in the world, ended up killing credit in Venezuela, but it had consequences. On the other hand, the exchange rate anchor has had an effect, but it has limited local production, and has an unstable framework,” says Vera.
After years of hiding the economic figures and refusing to present accounts to the Parliament that the opposition dominated until 2020, Delcy Rodríguez, vice president of the Republic, in charge of the economic area, has presented the 2024 Budget to the legislature, which foresees a increase in national income.
“Inflation has slowed down, it did so in November compared to October, it will do so in December, and also in January,” says financial analyst Henkel Garcia. García agrees with Vera about not decreeing wage increases as one of the causes of the loss of force in price increases. “The country's tax revenues have increased a little and that has allowed some exchange stability. Of course, the worker is paying for that.”
The current Venezuelan economy, a very reduced expression of its traditional version, survives today with its oil income, in just 800,000 barrels of production per day, gold production, income from remittances, and a lukewarm recovery in its production of iron and inputs. steelmakers, after disastrous efforts in which millions of dollars were lost. Industries operate today at 30% of their capacity and serve a much smaller market, after the massive diaspora of these years. The construction industry remains in decline. Bank credit had been pulverized by inflation and is only now appearing on the market again.
The realization of these economic expectations will depend on the performance between the tensions between the Maduro Government, the Venezuelan opposition and the United States. The arrest of Roberto Abdul, director of the NGO Súmate, could finally crack what was agreed in Barbados, and the restoration of total sanctions on Venezuela is a certain possibility.
The analysts consulted doubt the imminent return of sanctions, even despite this new crisis in dialogue. “My impression is that the sanctions will be relaxed even if the Barbados agreements fail,” says economist Francisco Rodríguez. “I believe that an important part of the current United States Government wants to normalize its relations with Venezuela and is very aware of the failure of the sanctions policy. There are problems with the immigration crisis and an interest in Venezuelan oil. “There may be gray areas in the interpretation of the sanctions, between what was agreed in Barbados and some partial agreements.”
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