Hyperinflation is taking hold of all spheres of Venezuelan society at present. Any activity of individuals or families is conditioned by constant increases in consumer prices. What people purchase, whether they go to work or not, what is being discussed in the market, depends upon this. Conversations about this issue practically take center stage in the lives of Venezuelans every day. Denial has not done any good. The power of hyperinflation is disrupting the country’s economic and social areas as well as its policies.
Such is the magnitude of this disaster that the International Monetary Fund (IMF) announced just late last month an updated inflation rate forecast for Venezuela in 2018. The IMF first said in October that inflation could reach 2,300% this year. But in the light of the events of the past few weeks, the organization said that inflation may be as high as 13,000%. Not to mention if we add a 15% drop in economic activity as forecast by the IMF. That is to say, should the IMF forecast prove right, Venezuela would have in 2018 the highest rate of all hyperinflations recorded in Latin America, with the exception of Nicaragua in 1987.
What determines that a problem can be solved, in the first place, is the willingness to solve it. Without that willingness, it is very unlikely that any progress can be made. That is precisely the case of Venezuela. The current government has not accepted that hyperinflation is a problem related to the policies it has implemented. It has already been proved that hyperinflation is mainly caused by monetary and fiscal imbalances that can be controlled quickly, as long as there is awareness of the situation. And under these circumstances, the survival of the Government is focused on all the resources for the next elections in order to cling to power. Meanwhile, the actions of the Government, whose sole purpose is to increase electoral strength, make hyperinflation worse because they increase the failures of the policies implemented. All of this because there is a belief that the policy options will require all kinds of costs, so it is easier at this time to proceed as planned. That being said, we cannot expect the Government to change its policies before the upcoming presidential election.
It is clear for the Government that after the election it would have to analyze hyperinflation from a different perspective. And then there would be another great limitation that has been chronic in the current government: the difficulty to make timely and complex decisions, mainly because there are many groups and actors involved. Each of the policy options would have critics and adversaries with varying degrees of influence, which makes the decision-making process very complex. Regarding the alternative to the current government, that is to say, Venezuela’s potential new rulers, it would be necessary to ask if there is consensus to implement a stabilization program that solves the hyperinflation issue from the root. It is worth recalling that the government of Violeta Chamorro in Nicaragua, made up of a broad alliance of parties, was only able to implement an anti-inflation program nearly year and a half after taking office.