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Wednesday, 24 April, 2024

Venezuela can’t face the economic crisis generated by the pandemic

According to the experts, Nicolas Maduro tries to apply the same measures that other countries with high public spending but might have severe consequences in the medium and long term because of the weakened Venezuelan economy.


Countries had closed their frontier and decreed lockdown to avoid the spread of the coronavirus. The economy falls, and airlines, restaurants, and hotels know they can go bankrupt.

Venezuela doesn’t escape from this reality. Any scenario that economists projected for the country changed three weeks ago. The crisis generated by the coronavirus outbreak, plus the falling of oil prices, the sanctions, and the debts, configure a reality that can trigger a stagnation of the economy.

The crisis generated by the COVID-19 represents news risks to the Venezuelan economy in the hands of the Nicolas Maduro government, halved since 2013, and especially for sectors that have experienced slight growth during the last year thanks to the relaxations of controls, the growing use of the foreign exchange, and to the supply of products due to the import liberalization.

Maduro announcements

Sunday, March 22nd, Maduro decreed several measures, which he pretends to reduce the economic impact due to the national quarantine that keeps the country paralyzed. Among the announcements, the questioned leader suspended payment for six months on loan interest in banks of the country, alongside the suspension in the payment of rents as well to business or housing.

Further, he said to the Conatel head to manage with the companies that provide telecommunications and internet to enlarge their services and the suspensions of the cuts of this for six months.

Experts consider that Venezuela can’t execute economic measures with high public spending because now they can produce the money but have no capacity to recovery in the future, unlike other Latin America or European countries with advancing and emerging economies.

Economic measures in Venezuela
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On March 24th, the vice-president of the economic area in Venezuela, Tareck El Aissami, specific the measures to face the economic catastrophe that dragged down all the global financial systems.

According to the economist, Daniel Lahoud in Venezuela, there are no funds to promote a recovery in the way they are used to “with a government injecting resources that oils allow them, and also borrowing irresponsibly and messily.

The expert in the international economy, Luis Angarita, explains that the global and local quarantine leads companies to fire their workers. This situation causes the income of the families to fall, which implies low consumption, production falls, and a vicious circle begins.

“In European countries like France or Germany, are adopting measures to break that circle, subsidizing some expenses of the families that fall into unemployment to avoid that national falls. They are looking to reduce the pressure in the companies, so they can continue working, and their first option is not dismissal but to reduce their costs,” Angarita explained.

The economist also said that Maduro took similar measures to Chile and El Salvador, but they cannot compare the situation with those countries, because the government system in Venezuela is too big.

“If you compare the size of the government with the total GDP in Venezuela is too much bigger than any Latin American country. Venezuela is almost the only country where basic and major companies belong to the government. In Chile and El Salvador, governments do not own companies. The size of the Venezuelan government is extraordinary, only in the communist countries before the fall of the Berlin Wall had the dimensions of the government that we have,” said Angarita.

The Venezuelan economy would continue to fall after the coronavirus, experts say.
Venezuela after the coronavirus

Whit hyperinflation in 9.585%, according to the Venezuelan Central Bank, a fall in oil price below 20$, and financial sanctions, the Venezuelan economy faces a big challenge.

The economist Lahoud explains that Coronavirus is a health- juncture, which means that measures should be about health and no economics. Lowering the interest rate or increasing public spending is no plan to face a virus.

He added that Maduro measures are designing to get people’s attention but not to generate prosperity, “There only political measures.”

Meanwhile, the international expert Angarita considers that Venezuela will be deteriorating since it accumulates eight-years in hyperinflation and destruction of its production, which will mean more poverty to Venezuelans.

Original text by Daniel Benitez.

You can read the full report in Spanish here.

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