Venezuelan economy has stopped bleeding and has started healing

Venezuela’s GDP is forecast to grow by 1% in 2022. 
What a pleasant surprise ! What a relief !.. after seven consecutive years of GDP contraction.
 
The country had suffered a brutal -124.4% GDP contraction cumulatively since 2014. The economy shrank by  -30% in 2020,  -28% in 2019, -19.6% in 2018, -15.7% in 2017 and -17% in 2016.  
 
Even the inflation which had soared to five digits (132,060 % in 2019) has now come down to 2719% in June 2021. 

 

The ruling Socialist party is seeking to reinvent itself, offering economic liberties while maintaining its authoritarian grip on the country. Earlier, the government nationalized whatever it could and strangled the private sector with price control, foreign exchange and import restrictions. The private sector reduced production and investment to cut the losses. This lead to shortages of essential goods and long queues before supermarkets. 

 

Now the government has changed its strategy. It has opened the door for private sector to do business and make money. It has lifted price controls on basic goods, allowed tariff-free imports. There is virtually no tax enforcement on businesses and individuals. Most important, the U.S. dollar, which was long scorned by the ruling regime as a tool of imperialist control, is now considered the de facto national currency. Remittances from the Venezuelan emigrants keep sending dollars and the rich who kept the dollars abroad are bringing them back to the country to take advantage of the new profitable opportunities.
 

The government no longer subsidizes food, fuel or services, and private companies are trying to fill the gap. Private internet companies, importers and healthcare providers are slowly trying to fill the holes left by the collapse of the once sprawling public sector. 

 

Shortages of food and medicines have been eased, namely because vendors, who used to be burdened by rigid state-set price caps, can now charge hefty prices for their goods and services. Stores are filled with imported goods for those who can afford to pay in dollars.

 

Among the businesses finding new life are gambling casinos. President Chavez, had closed all of the country’s gambling houses, saying they were rife with vice and only enriched “the bourgeoisie.” But under Mr. Maduro, a National Casinos Commission overseen by army generals has sold licenses—for $350,000 each—to 30 new casinos around the country with names such as Baywatch, Bellagio and Hotel Dubai.

It seems that the economy cannot get any worse and it has already started bouncing back. The political crisis caused by the  system of two Presidents ( Juan Guaido was the president recognized by US and its allies) is discredited now. The European Union which had gone along with the US in recognizing Guaido has already sent observers to monitor the elections being held by Maduro regime this weekend. The Lima Group, which recognized Guaido as the legitimate interim president, has lost its credibility after the new leftist government of Peru has recognized Maduro as the President. The US attempts for “regime change” has failed. The Biden administration has stopped the bullying and intimidation tactics practised by the Trump gang. The opposition Parties are now participating in the regional and local elections scheduled for this Sunday. 

Of course, the US economic sanctions continue to strangle the Venezuelan economy. But the US government seems to have become less strict in implementation of the sanctions. In October- November this year, two cargoes of methanol reached the US from Venezuelan ports directly. From January to October, Venezuela has exported globally about 1.75 million tonnes of petrochemicals and byproducts, increasing from 1.03 million tonnes exported for the whole of 2020. The oil exports have also picked up in 2021 at a time when the oil prices are rising.