First semester of the uneven economic recovery of Venezuela, key points

By Héctor Pereira

RIO DE JANEIRO, BRAZIL – At the end of the first half of 2022, Venezuela shows signs of an incipient economic recovery, especially in its GDP growth rates or in the reduction of inflation compared to previous years, which does not cancel out social inequality or the precariousness of basic services, among other problems.

The improvement of the country, whose economy has shrunk by more than 70% in the last decade, is beginning to show in an increase in consumption or in the incessant opening of small businesses, a buoyant reality in Caracas, while millions of people in the periphery continue to in poverty without being able, at times, to buy what is necessary to eat.

Read also: Check out our coverage on Venezuela

Here are some key points to this uneven growth:

PRICES AND CURRENCY

Accumulated inflation in the first semester stands at 53.8%, one sixth of what the indicator demonstrated in the first half of 2021, according to measurements by the Venezuelan Finance Observatory, an independent entity made up of economic experts.

Meanwhile, the bolívar devalued by 17% against the dollar in the first half of the year, according to reports from the Central Bank (BCV), a much better figure than the same period in 2021, when the Venezuelan currency was depreciated about 50%.

These results, according to experts, are due, among other reasons, to the Executive’s efforts to control the demand for dollars, reducing the issue of bolivars, necessary to buy foreign currency, through the reduction of public spending and the restriction of bank credits.

OIL AND EXPORTS

Oil, Venezuela’s main source of wealth, continues to fluctuate in terms of monthly production, which went from 775,000 barrels per day (bpd) in April to 735,000 in May. The data provided so far by the Organization of Exporting Countries (OPEC) give an average of 755,000 bpd.

Meanwhile, exports showed a growth of 182% in the first quarter, according to the Government, which in May estimated the increase in non-oil companies at 76%, without explaining to which period of time the data corresponded.

With this reality, Venezuela is moving away from the goal set by President Nicolás Maduro of producing 2 million bpd by the end of 2022, as well as the goal of exporting 20% ​​of everything that is produced, since -denounce the industrialists- three quarters of the productive apparatus are inoperative and international sanctions continue to restrict their ability to act.

FOOD AND WAGES

The minimum salary is located at VEF130 (bolivars), after an increase that came into effect in March and that meant an increase of 1,705% in this amount that is received by about 10 million people, most of them workers and pensioners.

The celebrated salary increase was translated, at first, into US$28 a month, an amount that, with the currency devaluation, has been reduced to US$23.4 or, what is the same, in an ability to buy only 5% of the necessary food, since the family basket is around US$480.

WATER AND ENERGY

The intended economic reactivation comes up against an electrical service that is interrupted almost daily in most of the country, according to independent measurements of those affected by this situation.

Likewise, more than half of the new ventures and citizens who aspire to be part of the recovery must overcome a poor internet connection, the fact that water does not reach the pipes daily and, in general, to deal with public services that are negatively valued by 50% of Venezuelans.

PRESENT AND FUTURE

The Economic Commission for Latin America and the Caribbean (ECLAC) estimates that Venezuela will grow 5% this year and will obtain the best performance in South America, an opportunity that the Maduro government hopes to enhance with more foreign investment and the reopening of vehicles at the terrestrial borders from August.

In this sense, the president undertook an international tour in June with which he plans to attract capital from Turkey, Algeria, Iran, Kuwait, Qatar and Azerbaijan, while maintaining a channel of dialogue with the United States that allows, as Chavismo intends, the uprising of some financial penalties.

All this economic recovery lacks precision in the midst of the official silence that characterizes the Executive and that, in order to shield this power to act without control, has recently approved the Law of Exclusive Economic Zones that grants the Head of State powers to create tax-free businesses in some geographic areas of the country.

With information from EFE