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Venezuela Economy is in Free Fall

Venezuela's economy is in free fall. Will a recall election of Maduro be their only option?

free fall

Venezuela Economy is in Free Fall

By Shari Dovale

Venezuela is the country with the largest oil reserves in the world, yet the people have no food, there is little electricity, and the government can’t even afford it’s own inflation.

A country with a fiat currency, which Venezuela does have, is never supposed to be able to actually run out of its own money.

Venezuela does not print their own money. They hire this out to several other countries. As is expected, however, the vendors are tired of not being paid. Venezuela is now so broke that it may not have enough money to pay for its money.

Free Fall
President Nicolas Maduro

After a 25 percent increase of the minimum wage on March 1, President Nicolas Maduro has ordered another 30 percent increase that was to be effective Sunday, May 1st. This will push the minimum wage to 15,051 bolivars a month. That is about $1,500 at the official exchange rate, but is around $13.50 at the current black market rate, which largely sets prices of goods for Venezuelans.

Venezuela, in other words, is well past the point of worrying that its economy might collapse. It already has.

Amid shortages of toilet paper, beer, medicine and water, the country’s most crippling shortage has been that of food.

With Venezuela now importing most of its food, the shortages compound. The government have asked people to maintain their own urban gardens. But, this is a band-aid for a country of 31 million people.

Phil Gunson, who is based in Caracas for the International Crisis Group, warns of a pending humanitarian crisis.

Free Fall.“At least one in 10 people is eating two meals a day or less. There isn’t starvation. We are not talking about famine,” Gunson says. “But we are talking about malnutrition, particularly in the case of children.”

Living in a severe recession and a dysfunctional state-run economy, poorer families say they sometimes skip meals and rely more on starch foods.

The Socialist government has responded to the long lines at the government-run grocery stores. They turn away most of those trying to line up.

To shorten the lines, police began to enforce a directive from President Nicolas Maduro’s administration that limits consumers to two shopping days per week at government-owned food stores.

Police turned away many shoppers under a new system that limited access to stores based on the last digit on a shopper’s national ID card. Venezuela’s Immigration service, SAIME, also checked foreign shoppers’ papers to confirm legal residency.

Free Fall
Police stand guard outside the entrance of a supermarket in Caracas, Jorge Silva/Reuters

“The smuggling and long lines are over,” said Alejandro Milano, a coordinator of Venezuela’s Food Mission. “This is a much fairer system.”

For President Maduro and his cohorts, it’s panic time. Declaring an absurdly brief, two-day work week is an abject admission of failure. It will do little to buy the government breathing room.

Venezuela’s economy is in Free Fall.

Sensing genuine public outrage, the National Electoral Council finally approved the paperwork necessary to begin collecting signatures for a recall election to oust Mr. Maduro — almost two months after the opposition requested it.

Could this be the only way out of Venezuela’s crisis?

 

 

 

1 Comment on Venezuela Economy is in Free Fall

  1. Brazil is next and then a cascade through the Americas, then the EU resumes as the bail-outs fail, the UK “Brexit” goes through and the whole mess rolls into Japan with the BoJ failing after dumping Trillions in yen into the system and debt zooms toward 300% of GDP.

    Finally, the US and the dollar will sink as the world is awash in debt with no buyers other than central bank monetization. The day the dollar and T-bills die begins the long slide through a complete restructuring of the global finance and fiscal structure. The following decade will be remembered for the next two-three generations. Prepare for IMPACT!

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