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The other side of the 10-year challenge: the Venezuelan economy

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Inflation in 2009 closed at 25%, this year it will close at 10,000,000%, Venezuela's economy is unrecognizable from that of 10 years ago

The other side of the 10-year challenge: the Venezuelan economy

Ten years ago, four years before Hugo Chávez last term that left as current president Nicolás Maduro, oil prices started to fall because of the international financial crisis of 2008. However, since 2010 these prices would increase again, staying between USD 84 and USD 103 until 2014. According to the BBC and Miguel Álvarez, an economist at the consultancy Ecoanalítica, "Between 1999 and 2014, Venezuela received USD $960,589 million. An average of USD $ 56,500 million annually for 17 years."

Leer en español: El otro lado del reto de los 10 años: la economía Venezolana

Debt, expense, and expropriations during Chávez's term

During this period, the country also received income through external indebtedness, according to the BBC: "Between 1999 and 2011, USD $54,327 million were issued in bonds of the Republic and bonds of the state oil company PDVSA. Part of that amount has already been paid. "It is for this reason, affirms Ecoanalítica, that Venezuela has debts of USD 92,750 million programmed until 2027.

Likewise, the country has also been a victim of excessive spending by its leaders. The most serious example of this during the last decade occurred in 2012 when public spending presented a deficit of 17% of GDP, while the price of oil stood at 103 USD.

In the same way, between 2007 and 2011, the largest number of expropriations was presented by the government. The Venezuelan Confederation of Industrialists states that between 2002 and 2015 there were 1,322 expropriations, which affected from micro-enterprises to multinationals such as Cemex, Banco Santander, Hilton, Owens-Illinois, Exxon Mobil, Total and ConocoPhillips.

On the other hand, in 2010 the then president Hugo Chávez had to devaluate Bolivar's price 17% against the dollar when it came to priority imports, and 50% when it came to other imports. This with the purpose of responding to the economic decline of 5.8% with which the country closed in 2009, as well as the inflation of 25% presented by the country in the last quarter of the same year.

In 2012, during Chávez's last term, an attempt was made to fight inflation by applying price controls to basic products. Likewise, the country became a member of the Mercosur regional trade bloc.

Also read: Will Colombia overcome Venezuela's oil production?

The collapse of oil prices

2013 began with Chávez death and inflation of 50% to which the National Assembly responded by endowing President Maduro with emergency powers. For 2014 the situation did not seem to improve. To this were added intense protests for lack of security, which resulted in the death of more than 28 people. That same year, the government had to cut public spending, as oil prices reached their biggest drop in 4 years.

Thus, at the beginning of 2016, President Maduro, in his attempt to fight the crisis, returned to devaluate the Bolivar and established what was the first increase in the price of gasoline in 20 years. However, these policies, far from being successful, sparked protests in the country's capital, pointing to Maduro as responsible for the economic crisis.

In 2018 the government launched the sovereign Bolívar, eliminating 5 zeros of the previous currency. This new currency was linked to the Petro cryptocurrency. Likewise, 2, 5, 10, 20, 50, 100, 200 and 500 sovereign bolivars began to circulate, the minimum wage was increased to 34 times its value and the VAT increased by 16%.

Finally, this 2019 begins with hyperinflation that in November 2018 closed at 1,300,000%, causing prices to double every 19 days according to data from the National Assembly (controlled by the opposition). However, the currency has not stopped falling and the IMF estimates that 2019 will close with inflation of 10,000,000%.

 

LatinAmerican Post | Sofía Carreño

Translated from: 'El otro lado del reto de los 10 años: la economía Venezolana'

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