Shortages, high level of inflation and uncertain living standards are the linking features that characterize both the current situation in Venezuela and the specular one in Zimbabwe fifteen years ago. The country started experiencing hyperinflation from 2000, when discrepancies between the official currency rate and the black market rate arose, which continued to grow at a dramatic rate during the following years. The 30 July 2008 the African country redenominated the Zimbabwean dollar by removing 10 zeros, but then, after a further nomination in 2009, it was entirely suspended in favour of the US dollar in government transactions. The dollarization helped to stop the inflation and to stimulate the economy. After the recovery, now Zimbabwe is known as one of the fastest growing economies in the continent.
Venezuela, as we anticipated, offers nowadays an economic situation not far away from the one we briefly depicted. The South American country was ran by Hugo Chávez between 1998 and 2013 and his successor Nicolás Maduro has been proposing the existing economic policies directed to face large shortages of goods and a high inflation rate.
The best indicator to outline the real Venezuela drama in the Latin America context is to analyse the Global Misery Index. This index is the sum of the unemployment rate, the lending rate and the inflation rate, minus the annual percent change in real GDP per capita. It allows us to understand the factor that contributes the most to the status of the different ranked States. Steve Hanke, an economist of Johns Hopkins University, took evidence of Americas situation comparing Misery Index Scores during the last three years: as shown Venezuela is still the most “miserable” country on the planet and its index triplicate in a two years period.
The International Monetary Fund (IMF) has forecasted the inflation would reach a peak of 720% during this year. The economy is suffering because of oil’ s low prices, which is one of the primary sources of revenues coming from exports (95%), deteriorating dramatically the living conditions of the people. Even if the oil price recovered in March, it is not enough to boost the revenues; needless to say that the majority of families could not guarantee typical three-meals per day, education and health to their children and buying any kind of essential goods becomes harder considering the huge amount of banknotes needed in order to pay. “It’s a very bad sign to see people running around with wheelbarrows full of money to buy a hot dog,” said the economist Steve Hanke. “Even the cash economy starts breaking down.”
Venezuela does not have enough money to pay for its money: it cannot print new bills faster than the incessant increase in prices. At the beginning of 2015 the Central Bank of Venezuela ordered to print 2.6 billion banknotes, with the main factory counterparties being the U.K.’s De La Rue, France’s Oberthur Fiduciaire and Germany’s Giesecke & Devrient; at the end of that year the request has tripled and the companies on order were concerned by the situation. As a result the government only received a bid of just 3.3 billion notes and continued to look for new partners.
Analyzing the hypothetic price that each OPEC member requires to balance its budget, we could immediately outline that Venezuela needs a higher price to sell its oil products than other states. Venezuelan Energy Minister, Eulogio del Pino, strived to lobbying with Qatar, which efforts unluckily failed during a meeting in Doha on last 17th of April, when Saudis refused to sign the deal. This unfortunate output puts Venezuela under greater pressure to its many over indebted state-owned oil companies.
Venezuelan government is seeking some remedies to repair, or at least reduce, the issue; one idea has been to shorten the working week for public employees to two days in order to save electricity, limiting energy consumption by planned blackouts.
The opposition argues that these expedients will worsen the government position toward Venezuelan people. Last week the electoral authorities gave Nicolás Maduro ‘s opponents, the Democratic Unity Roundtable (MUD), the authorization to take the initial steps for calling a referendum seeking for about 200.000 signatures. Yesterday the opposition delivered to the National Electoral Board (CNE) more than 1.85 million signatures. This quantity of signatures in support of Referendum will allow to start a more formal procedure against Maduro consisting in gathering signatures from the 20% of registered voters.