Venezuela: Reeling under Hyperinflation
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Case Code: ECON066 Case Length: 12 Pages Period: 1999 - 2018 Pub Date: 2018 Teaching Note: Not Available |
Price: Rs.300 Organization : - Industry : oil Countries : Venezuela Themes: Hyper-Inflation |
Abstract Case Intro 1 Excerpts
"The country is facing an unprecedented economic collapse, caused by political mismanagement exacerbated by low oil prices"
- Jean-Philippe Pourcelot, Venezuela economist, Focus Economics, in 2017
Introduction
On December 3, 2016, Venezuela, once Latin America’s richest country, entered the record book of historical events to become the 57 th country in the economic history of the world to have experienced hyper-inflation. Its central bank reported the highest-on-record inflation of 180% and 240% in 2015 and 2016 respectively. The country was facing the world’s worst ever economic disaster. The citizens were suffering from food shortages, hunger, death due to lack of medicines, and escalating homicide rates 5 , which were turning the nation into the second most violent country in the world outside of open war. There was no sign of improvement in the year 2017 either; in fact, it was worse than 2016. The opposition party (Congress) in Venezuela claimed that the inflation level had risen further to almost 800% between the end of 2016 and the beginning of the year 2017. According to IMF projections, inflation was expected to reach 13000% by the end of the year 2018, which would reduce the size of the economy by 15%.
Economists claimed that too much dependency on oil and not having made policy changes to adapt to the low petroleum price were the major reasons for the plight in which the country found itself. None of the steps taken by the government headed by President Nicolás Maduro to control inflation, like implementing price control or fixing currency exchange rates, were effective in improving the situation. It remained to be seen how Venezuela would come out of this economic crisis.
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