Venezuela still has the highest rate of inflation in the world (15,000 percent) but the Washington Post reports the situation has improved slightly compared to last year. What’s surprising is the reason for that improvement. Having tried everything else to remain in power, President Nicolas Maduro is now releasing his grip on the nation’s economy and letting something that looks like the free market take hold.
President Nicolás Maduro is making tentative moves away from the socialist policies that once regulated the prices of basic goods, heavily taxed imports and restricted the use of the U.S. dollar…
“The government had been unable to restart the economy any other way, so it’s doing what the people want” by giving in to the free market, said Ricardo Cusano, president of Fedecamaras, Venezuela’s chamber of commerce. The socialists are still in power, he said, but “they have lost the ideological war.”…
The changes taking shape here are the product of a combination of factors. For years, the government strictly limited the use of the U.S. dollar, long portrayed as an instrument of Yanqui imperialism. But last year, the government freed the exchange rate and more broadly legalized dollar transactions. It also eliminated massive import taxes on a host of goods.
But those measures have begun to work through the economy really only in recent months, as the government has taken the further step of abandoning attempts to control retail prices. Stocks of bread, chicken and beef that once sold for nearly nothing are now being sold at market rates, at least partly normalizing farm production and sales through supply chains.
A big part of the improvement this year is attributable to the mass migration of Venezuelans out of the country. More than 4 million have fled the country and now many of them are working abroad and sending home money for their families. The Post cites an estimate that this amounted to as much as $3.5 billion dollars in 2019. So the socialist regime that drove millions out of the country is surviving, in part, because of those who fled socialism.
By some estimates, there are three times as many dollars in circulation as bolivars, creating a de facto dollarization of the economy that is stabilizing inflation. Last month, even Maduro seemed to hail the almighty dollar.
“I don’t see the process they call dollarization as bad,” he said in nationally televised comments. “It can aid the recovery of the productive areas of the country and the functioning of the economy.”
Across Venezuela, mechanics and electricians, engineers and architects are increasingly charging in greenbacks. More companies are supplementing their employees’ salaries with U.S. currency. Collectively, economists say, 60 to 70 percent of families here are now regularly receiving some dollars — buying even some Venezuelans of more modest means a merrier Christmas this year.
It seems President Maduro has decided it’s better to accept some compromise with the Yankee dollar than wind up a deposed (or dead) true believer. Maybe it was the fall of fellow leftist Evo Morales that brought about this change of heart. Whatever the case, after years of misery created by his socialist policies, the revolution is finally compromising with reality.