Editor’s Note: The Venezuelan economy is one of the most repressed in the world. In fact, the country ranks next to last on the Heritage Foundation’s 2022 Economic Freedom Index. The only country with worse rankings is North Korea. But there are a few signs the country’s leaders are seeing at least some value in the capitalist model. Even as Venezuela’s President Nicolas Maduro courts despots in Iran and Algeria, he is opening up the government’s ownership of some parts of the economy, at least a crack. The story below is by Ernesto Rodriguez.
June 10, 2022—If you’ve been following Venezuela’s and Latin America’s news, you might have seen something extremely curious: Predictions of growth from the Venezuelan economy. They come from various places: the International Monetary Fund and big financial institutions. The IMF predicts a small pickup of 1.5 percent. Meanwhile, Credit Suisse estimates growth of up to the extremely high 20 percent. And Bloomberg news makes note of pockets of transformation.
Economic Predictions
If any of the predictions are right, or the real number falls somewhere in the middle, it would be the first time that Venezuela sees economic growth since 2013—the year former President Hugo Chavez died.
It would also mean the end of a nine-year recession that has rolled over the country’s economy and caused one of the biggest humanitarian crises in the world. Maduro himself claims double-digit growth this year, according to a June report in Agencia EFE.
But even so, there’s reason to be wary of the optimism. For one, the World Bank doesn’t even monitor the Venezuelan economy. As it noted in its recent report on the global economy, there’s a “owning to lack of reliable data of adequate quality” coming from the country.
Oil Is A Factor In Economic Change
So why the change? Many factors point to the economic turnaround. Oil production is one of them.
While the Venezuelan government can’t sell oil everywhere—namely the United States or the European Union, it is producing more than it did in 2019 and selling elsewhere. Despite an oil infrastructure that’s in bad shape, the surge in oil prices caused by the Russian Invasion of Ukraine is driving many countries to look to Venezuelan “black gold” as an option. And even the U.S. administration under President Biden is considering ways lift the sanctions. The trick, however, is doing that without suffering a political backlash at home and handing the Maduro regime a victory in Venezuela, not to mention South America.
Opening Up To Investment
At the same time, the government has allowed for a small opening of the economy [It is allowing for] and a kind of dollarization that has open a few opportunities for the private sector, even Spotify launched in the country years later than in the rest of the world, and has admittedly created a few more jobs.
Of course, even with this being true, it’s not like the country has suddenly recovered. Even an economy that’s growing is still crisis for the majority of the people who live there.
After all, the damage is deep when the economy shrinks for almost a decade and spirals in hyperinflation for at least five years. At the same time, the problems causing inflation in most of the West and world itself impact Venezuela. The pandemic it’s still going, even while many of us ignore it. What’s worse this year, of course, is the Russia-Ukraine war. That geopolitical destruction is affecting trade on food and energy, to say the least.
Impact On People
In Venezuela, the country also has its own unique issues. For one, the country hasn’t really solved its internal problems with basic services like health, electricity and water.
So even if the economy is picking up, is that really helping the people? The blog Caracas Chronicles says no. In a piece talking about how even in a more dynamic economy, the purchasing power of most Venezuelans hasn’t truly gone up.
Unequal Society
In fact, it has created a bigger than ever gap between the population. For 10 percent of the population, the situation is getting better. For the other 90 percent, it is getting worse. They are getting even poorer. It’s an ironic twist of fate, what started for the Left as a socialist dream so-to-speak has become one of the unequal societies in the world.
According to the people in the country, while there’s been a small stabilization, the purchasing power of most Venezuelans is still pretty low. Oriana Urdaneta, a young doctor who’s just starting her career, while most prices are in dollars and don’t go up as fast they are still pretty unreachable for many, “the minimum wage is around $30, and if you go to the supermarket you may need around $200 to buy what you need in a month”. But Urdaneta might be on the conservative side in terms of price, according to EFE (one of Spain’s most important news agencies) the month basic market basket is around $400, more than ten times the minimum wage.
In any case, we’ll have to see what happens. Maduro announced that some public companies in Venezuela were going to sell part of its stocks. That would indicate another break away from the country’s strict socialist model. Moreover, if those Mexico talks ever re-start we might see some movement related to the sanctions. Still, it’s hard to create a stable economic growth without an opening of the economy. And it doesn’t look like the regime wants to do that.
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