Crisis in Venezuela: three years of hyperinflation in five keys

According to Parliament, in opposition hands, in 12 months the price increase accumulates more than 3,000%. The local currency was devalued more than 80% this month.

Venezuela will end November with 36 months of hyperinflation on its back, and a devaluation of the bolivar, the local currency, which accumulated more than 80% in just the last month, after reaching one million units per dollar this week.

Although there is no consensus among specialists on when the oil nation will leave this state of high inflation, several experts consulted by the EFE agency coincide in blaming the government of Chavista president Nicolás Maduro and his fiscal policies for the pressing loss of the value of the Venezuelan currency .

The country closed October with inflation accumulated in 12 months of 3,332%, according to a report released by the Parliament, with an opposition majority, in early November.

In the period from January to October, inflation was 1,798%, according to the same measurement. As of September it was 1,433%.

But that index disagrees with the official one. According to the Central Bank of Venezuela, which usually records delays in the publication of these indices and has even stopped publishing some for months, the Caribbean country accumulated inflation of 844.1% between January and September.

Here, five keys to the three years of hyperinflation:

Although Venezuela went into hyperinflation in November 2017, prices began to rise strongly since 2014, when the country saw its cash flow cut by the oil price collapse and imports began to fall, a fact that led to severe shortages of basic food and medicine.

But the economist Luis Bárcenas told EFE that the financing -since 2014- of the enormous public spending of the Venezuelan State, through the Central Bank, was the fuel that set fire to hyperinflation in the country.

It is a phenomenon that Venezuelan economists identify as “perverse” and that they usually call a “money-making machine” or “inorganic money”, and which translates into the expansion of the monetary mass without there being assets or services that support the issuance of this new currency, which is not even printed.

“The government did not have the possibility of providing us with more cheap imports, which was practically its (economic) policy since the commodities boom of 2011, (and it activated) the money-making machine,” Bárcenas explained to EFE.

The Maduro regime responded to the rampant rise in inflation with more money issuance and strict price control, two measures trying put out the fire with gasoline.

“You are not attacking the cause of hyperinflation with the controls, it is like controlling gangrene by hiding the blood,” added the analyst, and assured that this tool produces shortages, a phenomenon that he identified as “hidden inflation” because it pushes the price rise .

Hyperinflation reduced to a minimum the real income of Venezuelan workers, who receive wages, in some cases, of million bolivars that represent just a handful of dollars.

“What hyperinflation has done is that the minimum wage of the Venezuelan, which came to be 200-300 dollars, more or less the same as in any country in Latin America, at this time (is) less than one dollar”, the economist and opposition deputy Ángel Alvarado told EFE.

According to the legislator, who is a member of Parliament’s Finance Committee, the minimum wage – 400,000 bolivars or 0.51 dollars, and received by retirees and public employees – “only buys 0.72% of the food basket”, what condemns millions of citizens to misery.

The consequence of hyperinflation is that Venezuelans increasingly reject bolivars, a currency that no longer fulfills the functions of money, according to economist Jesús Casique.

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