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Inflation in Venezuela

inflation in Venezuela

Venezuela has been in a decades-long economic crisis. Its economic decline is historically marked by el Viernes Negro or Black Friday. Black Friday took place on February 18, 1983, when the nation’s bolivar began depreciating in value. Inflation in Venezuela has been rising ever since. Recent hyperinflation in Venezuela has caused mass poverty across the nation. The result have been shortages of food and medical supplies and an unemployment rate of 35 percent as of December 2018.

Origins of Depreciation

In order to understand potential ways to alleviate Venezuela’s rising inflation rates, it is essential to understand how the economy reached this point. Back in the 1970s and early 1980s, Venezuela was a flourishing oil tycoon in possession of some of the world’s largest oil deposits. A worldwide shortage of oil raised the prices of barrels and created a golden period of economic growth for oil giants like Venezuela. Once the 1980s rolled in, oil prices stabilized. People started looking for more affordable, alternative energy methods.

This was detrimental to Venezuela’s economy since there was less demand for oil. Heightened production due to the previously increased oil prices left Venezuela with an abundance of oil produced and less demand. Venezuela’s reliance on exporting oil became its undoing. The price of oil continued to drop as the years progressed. Venezuelan oil production continued to exceed the actual demand. Inflation in Venezuela began here as the nation struggled to adapt in the face of failing exports.

Worsening Factors

Several factors contributed to the inflation of the Venezuelan bolivar. One factor was increased spending on social welfare programs and the importation of basic goods during Hugo Chávez’s presidency. While these actions helped to alleviate social unrest, this type of spending couldn’t be sustained as the oil-based economy tanked. In 2008, the global price of oil dropped to around $34 dollars per barrel, a record low that severely cut Venezuela’s core income. In 2014, another record low sealed Venezuela’s economic down spiral as the nation could no longer rely on its chief export for a means of financial stability.

However, this did not deter spending on welfare programs and imports, which led the nation into deficit spending. Deficit spending continues to be a major factor in increasing inflation in Venezuela. The further the nation falls into debt, the more the value of the bolivar depreciates. Currently, the full value of Venezuela’s debt is exceeds “the value of its exports” by 738 percent. Because of its massive debt, the U.S. implimented trade restrictions in early 2019. This has further decreased the sales from exports and the nation’s gross revenue.

Currency printing has been another cause of inflation in Venezuela. In order to pay for the importation of basic goods, more money has and is being printed by banks and the government. The value of the bolivar depreciates the more that is printed. It should be kept in mind, however, that these aren’t the only factors in inflation. The situation is deeply complex, spanning over decades of domestic mismanagement and failing international relations.

Qualifications for Hyperinflation

According to Forbes, a nation’s economy reaches hyperinflation once its monthly inflation rate surpasses 50 percent for a full thirty days. Once that inflation rate drops below 50 percent for another full thirty days, it is no longer in hyperinflation. Venezuela has been in a continued episode of inflation with some peaks of hyperinflation since November 2016.

Because of the longevity of Venezuela’s financial crisis, the nation’s economy is considered to be in hyperinflation. According to the International Monetary Fund, Venezuela’s GDP will drop another 25 percent by the end of 2019. The projected inflation rate by the end of 2019 will surpass 10 million percent.

Alleviating Inflation

Despite the economic down spiral in Venezuela, there is a potential solution that is common across business analysts. Forbes and Bloomberg Business both suggest that Venezuela adopts “dollarization.” This means abandoning the domestic currency in favor of foreign currency. Dollarization allows the economy to stabilize as Venezuela could leave behind the bolivar and adapt to an already stable foreign currency.

The reasons for inflation in Venezuela are numerous. There are some solutions out there, but they have yet to be implemented. In this case, adopting the American dollar may be the best approach to curb the rising inflation in Venezuela and reduce the poverty caused by inflation.

– Suzette Shultz
Photo: Flickr

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10 Facts About Life Expectancy in Venezuela

10 Facts About Life Expectancy in Venezuela
Life expectancy rates in Venezuela may have looked very different a decade ago under Hugo Chavez, but now the country caught the attention of the world with the presidency of Nicolas Maduro, which has resulted in civil unrest. The country is facing extreme hyperinflation and a reduced supply of power, healthcare and food, which has ensured the exodus of more than three million citizens in recent years. Although the country has the largest proven oil reserves in the world, its economy seems to have collapsed within months. Here are 10 facts about life expectancy in Venezuela.

10 Facts About Life Expectancy in Venezuela

  1. In terms of life expectancy at birth, Venezuela was ranked 92 in the world in 2017, with a total life expectancy at birth of about 76 years. The expectancy of males is 70 while that of females is 79.
  2. Coronary heart disease has been cited as the chief cause of death, resulting in roughly 16 percent of all deaths, followed by Cardiovascular disease, which had almost the same death toll as violence. The cardiovascular problems have been attributed to the increasing trend of a sedentary lifestyle that more people are leading now due to urbanization of the area.
  3. The country reached its lowest infant mortality rate of 14.3 percent in 2010. Unfortunately, there has been an increase since that year with the rate shooting up to 25.7 percent in 2017 from 22.2 percent in the previous year. The researchers from The Lancet Global Health could not determine one cause of the trend, but it indicated a number of factors that may be responsible such as the collapse of healthcare and macroeconomic policies.
  4. Maternal mortality rates have increased 65 percent to 756 deaths in 2016 from 6.3 percent in the earlier year. I Love Venezuela is an NGO that has been trying to reduce these rates by providing more than 4,200 families with medical supplies.
  5. The data provided by Venezuela to the World Health Organization showed that cases of Zika virus increased from 71 to 59,348 in 2016. This increase was likely one of the causes of the significant rise in both infant and maternal mortality rates.
  6. Encovi, the Encuesta de Condiciones de Vida, a survey on living conditions done by a group of universities, found that the citizens lost an average of 24 pounds of body weight in 2017 due to extreme hunger. Around 61.2 percent of the population was living in extreme poverty. The study also reported that poverty rates had increased from the previous year from 82 percent to 87 percent. Furthermore, 61.9 percent of the adult population reported going to bed hungry because they couldn’t afford to buy food. A U.S. based NGO, Mercy Corps, has expanded their operations on the Colombo-Venezuelan borders to appease such disparities as many Venezuelans are crossing the border into Colombia to escape the skyrocketing food prices.
  7. There has been a staggering increase in the number of children dying from malnutrition and dehydration that have been reported in recent years. South American Initiative is trying to mitigate the situation and has been successful in providing 1,500 meals per week and clean drinking water to the orphans and malnourished adults in the hospitals to tackle the enlarging of malnourished patients.
  8. As per the 2017 survey done by the Congress of Venezuela, nine out of 10 main hospitals of the country were found to be short of diagnostic facilities, including x-ray machines and laboratories, with 64 percent of hospitals being unable to supply food to their patients. Healing Venezuela is an NGO fighting the expanding lack of medical services and doctors in the country. They have provided seven tons of urgent medical supplies to hospitals and NGOs in need.
  9. Cuatro Por Venezuela Foundation has been able to assist 130 hospitals and institutions with more than 480,000 individuals served and more than 39,500 patients treated with its various programs targeting food, health, formula and school supplies.
  10. The country’s National Assembly estimated that prices rose 4,608 percent in 12 months in the span of 2017 to the end of January. Reports from the International Monetary Fund estimate that the inflation in Venezuela will rise to 10 million percent in 2019, an alarming projected increase from 1.37 million in 2018.

The Fight Continues

The former Health Minister, Antonieta Caporale, was fired shortly after he had released the health statistics in 2017, which were the only data provided by the government. The Venezuelan National Assembly had announced a humanitarian crisis in the country, further pleading for international humanitarian aid, which was quashed by the President.

Though these 10 facts about life expectancy in Venezuela may seem bleak, there is hope for the country with NGOs playing a major role in helping improve the current state. Several organizations are working towards improving the condition of Venezuela, including the Trump administration who have shown support and held secret meetings with the opposing military forces to formulate plans to overthrow President Maduro.

– Nikhil Sharma

Photo: Flickr