Venezuela's crisis has been marked by corruption, hyperinflation, one of the world's highest homicide rates, food and medicine shortages and the largest exodus "in the recent history of Latin America," according to the U.N. Refugee Agency.
Its chances to recover may start with President Nicolas Maduro stepping down or being forcibly removed — either by the opposition or through foreign military intervention. But that would just be the first step to get the ruined economy on the road to recovery. A major course of economic shock therapy will be required.
Venezuela's hyperinflation rate increased from 9,02 percent to 10 million percent since 2018, according to the International Monetary Fund, though it is expected to decline to back below 1 million percent due to recent moves by the country's central bank, according to a recent IMF forecast.
But the economic situation remains dire: The IMF says the cumulative decline of the Venezuelan economy since 2013 will reach 65% this year — for 2019 the annual decline forecast has increased from 25% to 35%. The five-year contraction is one of the worst in the world over the past half century and one of the few that was not caused by armed conflicts or natural disasters, the IMF stated earlier this week.
Some experts believe that in order to regain control over Venezuela's monetary system and zero out hyperinflation, drastic decisions will need to be taken.
"Venezuelans who have been suffering all of this time are going to be faced with a very dramatic, very draconian policy aimed at bringing their monetary system under control," said Dr. Eduardo Gamarra, professor of politics and international relations at Florida International University.
Wasted oil riches
Shock therapy measures, based on recent economic history, can include ending price controls and government subsidies, instituting higher tax rates and lower government spending to reduce budget deficits, devaluing the currency to boost foreign investments and selling state-owned industries to the private sector.
Venezuela will have to transform its current scheme of restricting foreign investment in order to fund the restoration of the energy sector, as well as its infrastructure, including the country's roads and bridges and the power grid. [ed. emphasis added]
Shock therapy supports the implementation of drastic economic policies to combat hyperinflation, shortages, reduce the budget deficit — Venezuela's current budget deficit stands at –29.95% in relation to GDP — and transition from a state-controlled economy to a mixed one.
It was used in post-communist Poland and Russia, and in other countries like Chile and Bolivia, where it successfully ended hyperinflation.
by Valentina Sanchez, CNBC | Read more:
Its chances to recover may start with President Nicolas Maduro stepping down or being forcibly removed — either by the opposition or through foreign military intervention. But that would just be the first step to get the ruined economy on the road to recovery. A major course of economic shock therapy will be required.
Venezuela's hyperinflation rate increased from 9,02 percent to 10 million percent since 2018, according to the International Monetary Fund, though it is expected to decline to back below 1 million percent due to recent moves by the country's central bank, according to a recent IMF forecast.But the economic situation remains dire: The IMF says the cumulative decline of the Venezuelan economy since 2013 will reach 65% this year — for 2019 the annual decline forecast has increased from 25% to 35%. The five-year contraction is one of the worst in the world over the past half century and one of the few that was not caused by armed conflicts or natural disasters, the IMF stated earlier this week.
Some experts believe that in order to regain control over Venezuela's monetary system and zero out hyperinflation, drastic decisions will need to be taken.
"Venezuelans who have been suffering all of this time are going to be faced with a very dramatic, very draconian policy aimed at bringing their monetary system under control," said Dr. Eduardo Gamarra, professor of politics and international relations at Florida International University.
Wasted oil riches
Shock therapy measures, based on recent economic history, can include ending price controls and government subsidies, instituting higher tax rates and lower government spending to reduce budget deficits, devaluing the currency to boost foreign investments and selling state-owned industries to the private sector.
Venezuela will have to transform its current scheme of restricting foreign investment in order to fund the restoration of the energy sector, as well as its infrastructure, including the country's roads and bridges and the power grid. [ed. emphasis added]
Shock therapy supports the implementation of drastic economic policies to combat hyperinflation, shortages, reduce the budget deficit — Venezuela's current budget deficit stands at –29.95% in relation to GDP — and transition from a state-controlled economy to a mixed one.
It was used in post-communist Poland and Russia, and in other countries like Chile and Bolivia, where it successfully ended hyperinflation.
Image: Getty
[ed. Whereby state assets get sold off to private interests, severe austerity measures imposed, crippling economic sanctions implemented, and voilà Venezuela is transformed into another client state of foreign capitalism (with widespread misery as an added bonus). Corporations are licking their chops. I wonder if Maduro is just biding his time to properly loot the treasury and find safe haven for himself and all 'his' money. That would be the normal game plan. See also: The Shock Doctrine (Naomi Klein). And: Trump’s Despicable Venezuela Embargo (The American Conservative)]
