Prices in Venezuela fell in the month of February, to the point of producing a deflation of 0.5%, according to what is reported by the Venezuelan Observatory of Finance (OVF), a monitor founded by opposition legislators that studies the behavior of the local economy in the face of the information opacity of the Venezuelan State.
The data confirms a trend of decreasing prices in recent months in the country, after a stormy hyperinflationary period of almost six years.
The president, Nicolás Maduro, set the goal in the middle of the election year to achieve “double-digit” interannual inflation, referring to the Government's goal: to drop below 100%.
Even according to the OFV, critical of the Executive, this objective is realistic.
The observatory calculates an annual inflation of 85%, still very high, but in clear decline in the local context.
In 2023, Venezuela closed with an inflation of 189%, and in 2022, with 305%.
The Central Bank of Venezuela has not published the most recent results.
The causes of this unusual phenomenon, according to the study, have a lot to do with the demanding economic adjustment imposed by the Maduro Government in the last three years, and with the modesty of the country's economic behavior: stagnation of local demand and consumption;
decline in the monetary issue and increase in the sale of dollars for international reserves.
“I would add an additional factor: the drop in society's saving capacity,” says Ronald Balza, economist and academic at the Andrés Bello Catholic University.
“A good part of the exchange stability observed in the local market has to do with this process of dissaving in force since 2015, which has implied income in foreign currency for domestic uses, from non-traditional or unknown sources.”
After the devastation produced by years of expropriations, nationalizations, property invasions, conflicts with capital and widespread corruption, the Venezuelan Government has been exercising strict monetary and fiscal discipline for three years, which has compromised the dimensions of economic growth in the post-modern era. pandemic, with harsh restraints on wage demands, but which finally seems to have exercised control over the increase in prices.
Although the calculations of her firm, Síntesis Financiera, do not yet show a deflation figure, economist Tamara Herrera highlights the stabilization of price behavior as a trend in the country.
“January 2024 was the fifth consecutive month of falling prices,” she says.
“Inflation rates seem stabilized at a very low level.”
“We come from a very long process of hyperinflation, with a very prolonged economic adjustment,” says Herrera.
“Credit control, among other state decisions to control prices, have had a recessionary burden.
Exchange stability is a reality, and that has even appreciated the bolivar.
“Spending has not run amok.”
The income of foreign currency from oil activity, in an economy that now has a size that corresponds to 35% of its traditional dimensions, has improved the supply of foreign currency, thanks largely to the increase in investments by the American oil company Chevron.
This circumstance, Herrera points out, has moderated the exchange interventions of the Central Bank of Venezuela.
PDVSA facilities in Lake Maracaibo, in November 2023.Gaby Oraa (Bloomberg)
The weakness of consumption has caused many stores and businesses to use their inventories to promote promotions and offers, which are spread on the streets of Caracas in places for food and entertainment, sacrificing profits for income.
The current prices of restaurants, shops, supermarkets, shops, concerts, with some exceptions, are not too far away in Caracas from those existing in any European city.
Some services -gasoline, transportation, water, electricity, internet-, although they are of poor quality, have subsidized prices that are much more accessible to the population.
Private healthcare exists for those who can afford insurance.
Public health is at its worst in decades.
After traditionally having a salary scale at the top of Latin American economies, with a minimum monthly income averaging $300 until 2012, the Venezuelan minimum wage is estimated at four dollars in the Maduro era.
A state primary school teacher earns eight dollars a month in the once millionaire nation of petrodollars.
A state university professor, 14 monthly.
Several alternate official bonuses can raise that income to 100 or 200 dollars.
The private sector pays better salaries, generally close to $400, with additional bonuses, to its middle managers.
Remittances from abroad are part of the lives of many people, and it is common to look for, or have, two or three jobs.
Only in the specialized trades, in engineering, senior management, banking, in the Chavista Government, among business elites, in powerful law firms, in the commercial world, among those who can work abroad, or with certain sectors of the state, it can exceed 1,000 dollars per month.
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