VENEZUELA
- Economic situation & forecast
Venezuela, in recent years, has been experiencing a catastrophic economic situation, with a problem of access to foreign currency.
The Venezuelan economy will enter 2021 with GDP 74% below the level recorded in 2013 when the crisis began. The combined effects of the pandemic at local and global level, and the stepping-up of sanctions by the Trump administration, dealt further blows to an already weakened economy.
However, the ongoing dollarization of the economy should prevent a return to the hyperinflationary episodes of 2017-2018. In this context, remittances sent by the 5.2 million Venezuelans living abroad will be central in providing foreign exchange to households. As emigration accelerates, structural issues for the economy, such as those presented by an ageing and increasingly uneducated population, will arise. Government spending will continue to be constrained by lack of access to financing, and investment will be non-existent, with even China reluctant to undertake new projects due to poor returns on previous investments. The Trump administration’s decision in November 2020 to ban crude-for-diesel swaps, which were previously allowed on humanitarian grounds, will also weaken the economy as a whole. For companies in the non-oil sector, this energy constraint will the problem of access to foreign currency for imports.
The economic situation of Venezuela remains very worrying, forecasts predict a slight increase in GDP (from -30% a 2020 to -10% in 2021)
Table 1 – Major Macro Economic Indicators (%)
2. Political situation and pandemia’s effects
A. Political situation
Despite the recognition of Juan Guaido, president of the national assembly, as the legitimate head of state by the majority of the international community, President Nicolás Maduro, who has the backing of the military, seems disinclined to relinquish power. The legislative elections of December 2020, in which the opposition refused to participate, allowed the regime to regain control of the last institutional bastion held by the opposition. The departure of opposition leader Leopoldo Lopez, who escaped the regime by fleeing to Spain, has not changed the situation. In addition, riots continue in the country between the gangs of Caracas.
B. Covid 19 management and vaccine policy
The COVID-19 crisis led to the introduction of restrictive measures in the country. These measures are expected to be only partially lifted in early 2021, as the virus is still circulating in the country and hospital care capacities are weak, so sluggish household demand is unlikely to be revived.
The COVAX initiative (an initiative aimed at ensuring equitable access to vaccination against Covid- 19 in 200 disadvantaged countries) is slow to produce effects because the doses do not reach the population. The Maduro government opts for a Cuban vaccine: Abdala. On 24 June, Caracas announced that it had signed a contract for the supply of 12 million doses of the Cuban vaccine, which is 92% effective after three doses, according to the laboratory that developed it. The opposition, part of the medical profession and the scientific community are critical of this choice of the Chavist government because this vaccine has not been approved by the WHO.
SOURCES
• COFACE, Venezuela, major macro economic indicators : https://www.coface.com/Economic-Studies-and-Country-Risks/Venezuela
- LE MONDE , Le Venezuela, vaccin. Cubain : https://www.lemonde.fr/planete/article/2021/07/10/le- venezuela-vaccine-cubain_6087836_3244.html
• BBC, Venezuela : Battles rage between police and gangs in Caracas : https://www.bbc.com/news/world-latin-america-57788117
