The political table in Venezuela, less than three months before the presidential elections, is moving on a deep stagnation of the economy that seems like it could not get any worse and, when it raises its head, it is barely a breath. This week, Nicolás Maduro, for the second consecutive year, did not increase the minimum wage during the Labor Day events. Remuneration remains frozen at just over 3 dollars per month and what has been done was to increase the bonuses that have replaced the Government’s social policy and which are insufficient. Furthermore, Chavismo wants to leave in the hands of the business community, which is rowing against the current in the country, the responsibility of contributing monthly to a fund to improve the income of pensioners. The law has begun to be discussed expressly in the National Assembly and has already raised concerns in some productive sectors.
The Government continues to restrict spending in a country in which more than 50% of the population lives below the poverty line. And the economic challenge, the one that worries people the most every day and the one that makes a Venezuelan think about emigrating every day, has become a propaganda issue. In many presidential speeches and official events, the leaders of the Bolivarian revolution make an effort to highlight the signs of recovery that the economy is offering, a circumstance that, they assure, will be consolidated “with or without international sanctions.”
This bias is accompanied by a million-dollar propaganda display to highlight the general improvement of the situation and strengthen the citizen’s bond with the values of Chavismo. The noise generated by luxury consumption to which a minority sector of the population has access, the return of concerts by international artists, the holding of elite sports competitions, the reopening of foreign brand clothing stores are frequently used as reference of that supposed well-being.
Sanctions and guarantees
In recent weeks, billboards have been displayed in Caracas with the image of the main opposition leader, María Corina Machado and other political leaders, baptized as “The sanctions train”, with a reference to Venezuelan criminal gangs such as the Aragua Train. But on the street, in addition to the propaganda billboards, one sees daily the unrest and the eternal search for survival. 65% of Venezuelans earn less than $100 a month, according to data recently presented by the firm Ecoanalítico, while the basic basket exceeds that figure five times.
The Government argues that the sanctions that have been imposed as pressure to produce democratic improvements in the country prevent it from maneuvering financially. But the years in which there was a slight recovery of the economy, during the rebound that occurred between 2022 and the first part of 2023, the sanctions were in force. It was last October when Washington lifted restrictions on PDVSA, the state oil company, in exchange for the Government generating conditions for competitive elections. The country spent a few months freed from sanctions and, although some sectors of the national economic board have shown certain signs of life, and income to the treasury has improved thanks to a limited recovery in oil production – stagnant at 700,000 a day, which They continue to be sold at discounts in the international market, according to Ecoanálitica—slow demand, caution in investment, industrial lag and income shortfalls are the order of the day. Democratic guarantees did not go very far either.
The window offered by the temporary relaxation of sanctions seems limited in the midst of the institutional precariousness in which Venezuela finds itself. “When economic, social and political rights can be violated any day and at any time, there is too much uncertainty to make any economic investment decision and also social investment, which are decisions that families make in the long term, such as allowing “The boy finishes high school to go to university, buy land so that the family can build a house for the future,” warns sociologist Luis Pedro España.
Although between 2018 and 2019 the Government reversed some controls on Chavista policy and undertook a process of de facto liberation of the economy, a legal framework persists that becomes a burden on that process. “This causes investors to make very short-term decisions, in which profitability has to be in months. That is why all flourishing businesses are those with rapid recovery of investment,” says España, researcher of the Venezuelan Living Conditions Survey at the Andrés Bello Catholic University. “Without the institutional reforms that are needed, the country will continue in this downward inertia.”
Adjusting expectations
In its quarterly report, the Venezuelan Finance Observatory reports that the country had modest economic growth in the first quarter of 2024, parked at 2% of the Gross Domestic Product (GDP). The figures continue the constant of 2023. A figure leveraged by a 20% expansion in oil activity and a certain increase in commercial and service activity, but in which serious lags are very evident in neuralgic sectors for employment. , like construction.
“One of the consequences of the release of sanctions has been exchange stability, inflation has been declining, the Government has greater cash flow and better expectations,” says Luis Oliveros, dean of the Faculty of Economics at the Metropolitan University of Caracas, who, however, is not very optimistic about what may happen at the end of 2024, especially because of the political noise. “Venezuela has two very different scenarios with or without international sanctions. The political noise has caused expectations to change. The growth projections must be adjusted, not all sanctions have returned, but they change the economic outlook.”
Oliveros recognizes that oil production can continue to increase laboriously, and that he hopes that some volume of investment will be maintained in the sector. For the first time in a long time, the Maduro Government appears to be making an effort to separate the economy from the zone of political conflict. But there does not seem to be anything clear about the consolidation of high growth rates, which would return the country to its old physiognomy, and remove it from the current Lilliputian dimension.
“It is complex to make exact calculations in Venezuela with the opacity of the data from the Central Bank of Venezuela,” says José Manuel Puente, economist and professor at the University of Salamanca and the Institute of Higher Administration Studies, IESA. Puente agrees that the conditions for economic growth are important if Venezuela does not leave the sanctions zone, and even more so, if there is no bloodless political change. “The economy can grow somewhat, the International Monetary Fund still registers a 4% recovery, but they will be low, insufficient rates. “You cannot aspire to development, to grow at high rates, to return to what we were, under these conditions.”
“The electoral issue will affect the situation, the outlook is not clear. Furthermore, a severe sanctions scheme will evaporate all the efforts made to control inflation,” says Oliveros. “Some more things will happen. “We haven’t finished watching the movie.” The economy of Venezuela, that place full of certainties, deceptions and many doses of propaganda.
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