July 29, 2021

Venezuela goes down in history with the most damaging hyperinflation in Latin America

Venezuela goes down in history with the most damaging hyperinflation in Latin America

With a year of hyperinflation that practically accumulates one million percent in 12 months, Venezuela has become the country in Latin America that reports the most damaging inflationary cycle in the history of the region and that still has no signs of stopping.

The prices of the products in the oil monoproduct country rise at a rate of 3 or 4% per day and each month the inflation rate reaches or exceeds 200%, a situation that leads Venezuelans to live in eternal tension.

Between 1984 and 1985, with a duration of 18 months, Bolivia reported a cycle of hyperinflation that added 23.454%, while Nicaragua, with 58 months of hyperinflationary stage between 1986 and 1991, added 13.109% and Venezuela, with just 12 months, and exceeds 980,000%.

The economist Asdrúbal Oliveros recalled during the forum of the firm Ecoanalítica "Economic Perspectives 2019" that was held this week, that a hyperinflation "is the final state of deterioration of an economy" and although it opens the door to hope by indicating that "no there is eternal hyperinflation "says that in order to get out of it, it must become" worse ".

"People think that we are in the hardest part of the hyperinflationary cycle and unfortunately we are in an intermediate stage, that is, the levels of acceleration in the inflation rate can be much more aggressive," says the specialist, director of the firm.

In addition, according to Oliveros, these levels of inflation, that average rate of 34% per week, "still does not take out of its comfort zone" the Government of Nicolás Maduro, which has maintained a policy of control over the economy and has limited economic rights of businessmen and consumers.

Maduro's policy is framed in the socialism of the so-called "Bolivarian revolution" promoted by the late President Hugo Chávez (1999-2013) and that is why Ecoanalítica experts point out that in these 20 "revolutionary" years there has been a systematic "attack" on "economic rights".

"In Venezuela, the private sector was not allowed to produce, the citizen is not allowed to decide what he is going to buy, but somehow all his economic rights are suppressed," says economist Alejandro Grisanti.

The reason why, according to the director of Ecoanalítica, an internal conflict did not break out while those rights were suppressed rests on the high prices of the barrel of oil that in most of those 20 years allowed the government to import food and other products without limitations .

Today the picture is very different, there are no economic rights and no foreign currency to import due to the fall in oil prices which has brought to Venezuela the worst shortage of all types of products, mainly medicines and basic basket foods.

The fall in oil prices generates the drop in international loans to Venezuela and the closing of financial markets which causes the cut in imports.

"This cut in imports with the fall in oil prices ends up generating the collapse of the Gross Domestic Product" a collapse that gives birth "to the vicious circle of hyperinflation."

The specialists explain that a Venezuelan worker who earns a minimum wage must work more than 100 hours to be able to buy a kilo of the cheapest presentation cheese.

"People know that the worst business they can do is save, it is to keep those assets in liquid form because they disappear, they disappear overnight with a huge inflationary process like the one we have," said economist Pedro Palma in the same Ecoanalítica forum.

Meanwhile, the International Monetary Fund estimates that Venezuela will close 2019 with 10 million percent inflation and the Central Bank of the oil country – which was stripped of its autonomy – continues to create inorganic money to finance public spending.

All this occurs while the state oil company Petróleos de Venezuela (PDVSA) produces less and less crude oil, with a prospect for 2019 of only 500,000 barrels per day – in 2012 it reached 3,000,000 – a company that was sacked by corrupt and used for attend social programs.

Faced with this bleak scenario, economists observe an imminent collapse of the country in 2019 that will lead to a radical change of policies that open up to the recovery of economic rights with a necessary and necessary international financing.

The formula for prosperity is, economists stress: that entrepreneurs can invest and sell their products and that citizens have the right to buy what they want.


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