Since Venezuela left hyperinflation at the beginning of the year, the economic crisis that it had forced in just 3 years seemed to have come to an end, with the unofficial dollarization of the country. And in a year in which oil has increased its price notably, it was expected that the accounts could balance without many problems. But the Caribbean country seems to have returned to its old ways: in a week, the ‘money-printing machine’ has started to work at full speed and the country’s total money supply has skyrocketed by 36%, which augurs a strong increase of inflation.
The data is historical: it is the second largest money printing in a week, only surpassed by the 40% that the money supply shot up in September 2018, in the midst of the hyperinflationary wave. To this is added a 44% increase in the dollar exchange rate, the highest rise in more than a year. And prices are noticing it: the annual inflation average is 137%, according to the Central Bank of Venezuela (BCV), but the annualized data for the last quarter is 480%, according to Bloomberg estimates.
All this despite the fact that US sanctions are being eased, partly because of the . The Government of Joe Biden has met twice with representatives of the Venezuelan president, Nicolás Maduro, and trade between the two countries has increased by 44% in the first semester, encouraging GDP growth that could be around double digits after 8 years of catastrophic and very deep recession.
The problem behind this new crisis is that the country is again overvaluing the bolivar. Until now, the increase in his dollar income allowed him to auction off enough currency to keep the banks happy. But the reserves have once again shown signs of depletion, and the BCV has once again cut auctions, from more than 400 million in May to just over 200 million in August, which has skyrocketed its price. As if that were not enough, a week ago a US judge ordered Venezuela to pay ConocoPhillips 8.7 billion dollars for the expropriation of its investments in the country in 2013, further putting pressure on its battered reserves.
For economist José Manuel Puente, the situation is only going to get worse because the bolivar is “extremely overvalued” and one dollar should be exchanged for 20 bolivars, compared to 7.9 at the official exchange rate. The black market is already hovering around 10 bolivars, and it shows no signs of relaxing.
With this new monetary coup, Venezuela re-enters the quicksand from which it believed it had emerged last January, when . Maduro celebrated the milestone by trying , passing a . But, without real reforms to the battered Caribbean economy, the end seems to be running out.
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