Venezuela “is trapped in high monthly inflation rates,” explains the Venezuelan economist Daniel Cadenas. Annualized inflation hit 359%, according to Bloomberg.
The world is experiencing a generalized inflationary crisis. Virtually all countries from Canada to Patagonia to the Nordics are reporting the highest inflation rates in their recent history.
In the midst of all this, there was a country that, surprisingly, had been left out of this dynamic: Venezuela. The country that a few years ago made headlines for breaking historical inflation records and was now experiencing a period of calm after years of economic and humanitarian crisis.
Apparent “Improvement” of the Venezuelan Economy
So much was the optimism that the government of Nicolas Maduro has been betting for months on a new narrative in which its flag is that the Venezuelan economy is “improving” in the midst of a complicated situation worldwide.
But this fantasy did not last long. The Venezuelan economy has already begun to show signs that it retains many of its previous ills, one of which is inflation, which recently reached an accumulated annual rate of 359% after three months of accelerated growth.
These data are collected by Bloomberg, which specifies that although they do represent a decrease compared to 2019 when this same figure reached 300,000%, it is a very high figure and even more so when compared to previous months.
Repeating Mistakes
The reasons for all this are concentrated in one: a return to old government policies that have increased the money in circulation in a small economy.
Since 2018, Maduro had applied a series of measures to control devaluation and inflation. Among them was the reduction of government spending and bank loans.
This led to both inflation and devaluation being controlled, and a certain period of stability being experienced. But this was not sustainable over time, and even less so if Maduro returned to his policy of increasing the money supply.
Within weeks, the government began artificially pumping money into the economy through social bonds and unsupported raises. With this, inflation skyrocketed and the bolivar, which had remained stable against the dollar, fell precipitously in a matter of days, giving a flashback to times when volatility was enormous.
This led to a situation where inflation is once again a problem. And thus, as the economist and university professor Daniel Cadenas explained to Bloomberg, Venezuela will not come out of an annualized inflation of less than 100%, without a real change in economic policies.
The reality is that Venezuela is still in crisis, even though there are certain improvements. The economy is still not even close to what it was in 2012, and there is a long way to go for this to happen.
By Audy Castaneda
