Venezuela Sinks Deeper Into Recession
Despite promising numbers for Latin America a whole, Venezuela continues to spiral out of control. The latest numbers released by the International Monetary Fund for Latin America call for a moderate growth of 1.6% in 2018 and 2.6% in 2019. For example, Chile expects a 3.8% growth in 2018 driven by a strong rebound of business and consumer confidence. Peru predicts a growth of 3.7% and Brazil forecasts a moderate growth of 1.8%. And then there’s Venezuela, whose economy continues to sink deeper into recession.
Venezuela finds itself in a worsening social and economic situation as a result of low oil production and macroeconomic imbalances. The Fund predicts a GDP drop of 18% in 2018, the third consecutive year with double digit drops.
Maduro and Chavez’s collective inability to root out corruption and Maduro’s currency manipulation have brought the country to shambles. Hyperinflation has set in and it’s expected to reach 1,000,000% by the end of 2018. This has made medicine and food, once subsidized by the government, unaffordable for Venezuela’s poor. In areas of deep poverty, salaries have fallen to the equivalent of $2 a month, forcing citizens to migrate or turn to crime for survival.
Maduro has exploited a complex currency system established by Chavez. He has set the official exchange rate at 10 Venezuelan Bolivares : $1 but only his political allies and the military have access to this rate. In reality, the Venezuelan currency is basically worthless and most Venezuelans have to pay the current exchange rate of 248,517 Bolivares: $1. In 2016, Maduro gave the military full control over the country’s food supply and they’ve used it to get rich. The military imports food at the 10:1 rate and sells it in the black market at the higher rate. Over time, corruption and currency manipulation have led to massive loss of state resources and the population’s loss of faith in public institutions.
Hugo Chavez mastered masking an autocracy as a democracy; however, his hand picked successor, Nicolas Maduro, has struggled to replicate Chavez’s agenda. Maduro’s failure as a leader has exacerbated the humanitarian and geopolitical crisis begun by Chavez. Years of protests have only led to countless deaths and Maduro’s consolidation of power with no solution or hope in sight for Venezuela.