Inflationary outbreak in Venezuela: prices rose 22% only in the month of November

Despite having overcome the most dramatic hyperinflation in history after decoupling from the bolivar, the Venezuelan economy has suffered a dangerous spike in inflation since March due to Maduro‘s attempts to reintroduce the national currency.

The socialist regime once again lost control of inflation and the exchange rate, despite the reforms undertaken since 2018. Retail prices rose violently by 21.9% only in the month of November, according to estimates reported by the National Assembly independent of the regime.

Inflation once again seems unstoppable and has shown a clear upward trend since last March. Prices jumped 10.5% in March, 10.1% in May, 14.5% in June, 17.3% in August and up 14.5% in October. The official statistics of the Central Bank of Venezuela (BCV), generally more imprecise, indicate lower increases, but report an inflationary skyrocket of 28.7% in the month of September.

The 3-month moving average for monthly inflation increased from 4.17% in February to almost 16% in November. The upward trend is becoming more and more evident, prices show a new rush out of control despite all the efforts of the dictatorship.

Year-on-year inflation touched a floor of 139% last July, but has since returned to its upward path. The year-on-year price variation reached 153% in August, 157% in September, 173% in October and up to 213% at the end of November.

Consumer prices accumulated an increase of 195.7% between January and November, and it is expected that the 200% threshold will be comfortably exceeded by the last month of 2022.

The exchange rate for parity with the dollar shot up 238% since January. The Nicolás Maduro regime was forced to liberalize most exchange control transactions as of May 2019, after the collapse of the system and the depletion of the BCV’s international reserves.

In this new scheme, the regime adopted a “dirty float” strategy through which the exchange rate parity is systematically intervened with the sacrifice of reserves, some of them accumulated by the sale of gold positions and others by the sale part of share packages of state companies. But not even this new system made it possible to avoid the return of the inflationary overflow.

DEVELOPMENT OF HYPERINFLATION IN VENEZUELA

Price controls also became derisory in practice. The regulations caused a general shortage of goods that reached 80% since January 2016, according to official statistics. The proliferation of looting of supermarkets and the energy crisis due to the scarcity of fuel led to the liberalization of most prices starting in 2017.

Without controlling the imbalance of public finances and without being able to contain the expansion of the economy’s money supply, the Venezuelan State completely lost its capacity for forecasting and action, becoming a “failed State” incapable of planning as a socialist organization would suggest.

The public debt of the Venezuelan State shot up to 240% of GDP in 2021, and expenditures represented 10.5% of the product, when until 2018 they represented almost 40%. Inflation made budget forecasting completely impossible, and although the successive budgets included sidereal fiscal expansions in all items, in practice inflation liquefied the assigned amounts over and over again and rendered them useless.

With information from La Derecha Diario

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