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  HOME | Venezuela (Click here for more Venezuela news)

TalCual: Unparalleled Destruction of the Venezuelan Economy
National and international experts have insisted that the new monetary reconversion, without taking the required substantive measures, will do nothing to heal Venezuela’s economy. Rather, it may make things worse for it

By TalCual

An announcement by the Parliament (aka National Assembly) on the inflation rate for May implies new records regarding the hyperinflation drama in Venezuela. In the first place, the seventh month of hyperinflation has been confirmed. That is to say, the nation’s monthly inflation rate has exceeded 50% from November of last year. The duration of hyperinflation in Venezuela has exceeded those experienced in Chile (1973), Peru (1988-1990), and Brazil (1989-1990). This means that, if the situation continues, it would also exceed the duration of the hyperinflation in Argentina (1989-1990) in four months.

The monthly inflation rate for May 2018 also is the highest in the history of the country, meaning 110%. According to this monthly inflation rate, the prices of goods double in 28 days. If a monthly inflation rate of 50% remains until the end of the year, the inflation rate, according to the National Assembly, would reach 35,000% in 2018, which would represent the highest hyperinflation rate in Latin America, and the highest hyperinflation rate in the world since 1980.

The conditions of this situation are every day more critical for the vast majority of the population. The possibilities of protection are only available for a very small sector of it. A hyperinflation rate of this kind, as is being expected, depicts a scenario of greater destruction of the Venezuelan society. There is no way to minimize this reality.

In this context, one of the fundamental questions is to identify if it is possible to revert this situation within a short period of time. This leads us to analyze the pattern of decision-making in this matter. The decision announced on the monetary restructuring has been presented and assumed as the solution to the problem.

According to the latest announcement by the Government, the monetary restructuring will be implemented at the beginning of August of this year. That is to say, the months of June and July should be added to the seven months already elapsed, which would translate into nine months of duration. And to those months it should be added the time it would take to realize that the monetary restructuring is not the solution. Since we know the pattern of decisions regarding this matter, it is quite likely that hyperinflation in Venezuela will spread throughout the rest of 2018. The consequences of the prolongation of this level of hyperinflation is very likely to reach the highest limits of impoverishment and destruction of productive capacity in the history of the world.

 

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