The nightmare of hyperinflation is over for Venezuela. In theory, the country has spent a year with monthly inflation figures below 50 percent, which bids farewell to a stretch of 37 hard months. Now the path of a recovery still seen with caution appears.
(Read: Venezuela, with signs of recovery: growth would be 8.6 percent)
During the last years, Venezuela registered a drop in GDP of 80 percent. His main income -oil- was also affected and went from receiving 100 dollars to 34 dollars per barrel.
(Be sure to read: Sanctions against Russia would hit Venezuela’s oil exports)
In 2014, a few months after Nicolás Maduro came to power, the situation began to deteriorate and in 2017, with the economic sanctions imposed by the United States, the pit was reached.
Those days when you had to line up for one or two kilos of corn flour, the fights outside supermarkets and the images of people who died of heart attacks in lines waiting for their turn to buy are still remembered. .
Although this has been overcome, there are still lines to get gasoline as well as people looking for food in the garbage. However, this 2022 is expected to grow 8.6 percent compared to 2021.
This data is provided by the conjuncture report of the Institute of Economic and Social Research of the Andrés Bello Catholic University (IIES Ucab), which estimates a better year for the country, despite the fact that extreme poverty closed above 90 percent , according to figures from this same institution.
The economic advance is focused on estimating that oil production could be located at 950,000 barrels per day. A) Yes, oil GDP would grow 39 percent with an increase of five percent.
How did things change?
Henkel García, director of the Econometric firm, explains to this newspaper that it all started in 2018, when there was a change in the national government’s position when it began to lower the harassment of businessmen and its entire policy of controls.
Although for García, this is not enough, at this time there is evidence of a slowdown in inflation and containment of the exchange rate.
“If this trend of fiscal and monetary discipline that the Government has had is followed, we could end up with double-digit inflation in 2022,” he pointed out.
The study by the Catholic University coincides with the views of García, who participated in the forum Analysis of the current situation in Venezuela and prospects for the year 2022 organized by the web portal La granvilla.
The document details that the measures implemented by the Nicolás Maduro regime, such as the “monetary and fiscal stabilization” carried out by the Central Bank of Venezuela (BCV), have had positive effects.
The researchers believe that inflation would reach 225 percent annually, down from 686 percent in 2021, and even lower compared to 2,960 percent in 2020 and 9,586 percent in 2019. However, that rate of 225 percent is still inflationary.
According to analysts, this recovery, which formally began in the second half of 2021, was also obtained by the increase in oil production and exports to Asian markets, managing to evade sanctions.
In this sense, the stabilization of the exchange rate allowed a certain freedom in the foreign exchange market, reducing the legal reserve requirement from 85 to 73 percent. In addition, tax collection has increased and the fiscal deficit has decreased. If this context is not modified, the path will continue to improve.
Another aspect that the research highlights is that the remittances sent by migrants, estimated at 2.7 billion dollars in 2021, by 2022 would be 3.5 billion dollars, which represents increases of 26.1 percent in 2021 and 30 percent in 2022.
Recovery without the IMF
If a loan had been obtained in this way, it would not have had to resort to private companies.
“Venezuela gradually adapted to the US sanctions and found new markets to direct its exports. This allows us to affirm that the Venezuelan economy is beginning to recover,” economist Francisco Rodríguez explains to EL TIEMPO.
However, Rodríguez warned that living standards will continue to be low compared to the past.
The also founder of Oil for Venezuela, when asked whether or not the intervention of the International Monetary Fund (IMF) is necessary, taking into account that the Caribbean country did not carry out this procedure, the expert highlights that with the IMF “everything would have been more easy”.
“Without a doubt, it would have been positive for the country to have had the support of the IMF because it would have prevented the contraction of imports from being so strong,” emphasizes Rodríguez. For him, the outlook is worse because although there is no debt with the IMF, there is with private companies reaching an amount of 170,000 million dollars.
This implies that although this debt is in default for reasons related to the sanctions, when the nation enters the world economy and the sanctions end, it will have to solve the debt restructuring problem.
“They are creditors who are willing to sue Venezuela, to take away assets, to seize payments for oil effects and the debt will accumulate faster,” Rodríguez warns.
Hence, everyone agrees that you are Venezuelan recovery samples are comparable to a person suffering from a serious illness, that although he is showing signs of recovery, he has sequels that are not so easy to heal.
uneven growth
The other side is that of ordinary people. Despite the fact that the data show visible improvements, the purchasing power of the common citizen continues to be a nightmare. An employee who depends on the public administration, or pensioners with the minimum barely have 2.5 dollars a month of income. Added to this, the vast majority do not have access to quality public services.
However, on Thursday, Nicolás Maduro announced that the minimum wage will be in the middle of the Petro (digital currency created by the Government), which is equivalent to 126 bolívares (28 dollars), plus a proposal of 45 bolívares in a food bonus, which would be about 10 dollars.
If this is executed, since the president did not indicate when it would come into force, in Venezuela there would be talk of a salary of 40 dollars, which represents an increase of 1,700 percent compared to the 10 bolivars that workers currently receive.
For the financial analyst Henkel García, it is important to bear in mind that if the economic contraction was 80 percent, to recover the level the country had, a growth of 400 percent would be needed. Hence, people do not fully feel the improvements that Maduro himself has spoken of.
“Commerce is recovering much more than the production of areas such as manufacturing, for example. In this unequal growth we still see very depressed salaries”, affirms García.
The humanitarian emergency still persists. For Susana Raffalli, a public nutritionist, Venezuela is still among the countries with the most intense emergency. In the region, it is accompanied by Guatemala and Colombia, the latter with an increased risk precisely because of Venezuelan migration.
And despite the fact that the regime tries to avoid them, the sanctions have also weighed on this panorama. “Today, 14,000,000 Venezuelans have humanitarian needs. According to the UN, 7.8 million Venezuelans are undernourished”, highlighted Raffalli.
Analysts agree that, in addition to the measures already adopted, it would be beneficial to improve basic services, expand bank credit, increase oil production and exports.
“If the fair prices law is repealed, that would give an institutional floor to the economic opening that we are seeing,” said García, who also agrees with the need to relax sanctions.
Everything indicates that the Venezuelan economy will continue to be based on oil revenues added to tax collection. With those 950,000 barrels per day that production would reach, there would be a growth of 75 percent in the country’s main industry, which currently does not exceed 543,000 barrels per day. “Furthermore, exports could reach 760,000 barrels per day,” says the Ucab report.
And in the face of rising oil prices, the great beneficiary is Maduro, who will have a way to show that he has found a way to one of his weakest points: economic stability. Something that would in turn mean political stability.
If this progression is maintained, at least until 2024, when the presidential elections take place, the current administration would find a desired stability with measures such as the reduction of the legal reserve and the BCV’s efforts to keep the exchange rate tied to avoid the rise of the dollar.
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