By Yunus Soner, Caracas / Venezuela
Oil, Bolivarian socialism, sanctions, hyperinflation … These are the keywords that have been reflected in the Turkish press from Venezuela in recent years. The country’s economy has really taken off in recent years.
In the recent presidential elections, the economy was one of the most important items on the agenda.
Fernando Bastidas is a member of parliament from the United Socialist Party of Venezuela (PSUV), which forms the backbone of the ruling coalition. Bastidas is also a permanent member of the Parliamentary Commission on Economy, Finance and National Development.
We interviewed him about the evolution of the Venezuelan economy in recent years in the capital Caracas before the election.
Where did the Venezuelan economy come from to get to its current point?
Well, we come from the last decade, from 2013, 2014, when a process of attack was launched against Venezuela at the economic level, and this found its clearest expression in the blockade, in sanctions. These targeted Venezuela’s finances, a group of commercial actors, and especially the oil industry, the heart of the Venezuelan economy. This is the starting point. This process resulted in a hyperinflation that exceeded 300,000% in February 2019 and also affected the national income by 99%, reducing the size of the national income to only 1%.
Of course, that affected the income of workers, because there is a significant mass of workers who are largely dependent on the public sector, and of course it affected the aggregate demand and therefore the whole dynamics of the private sector. This amounted to a chain of evils, in which no sector of the economy was left negatively affected by the impact of the blockade on Venezuela. Faced with this, President Nicolás Maduro launched an economic recovery program in 2018.
This includes a macroeconomic stabilization process to combat hyperinflation, which we have already come out of in the first stage. Then we fought high inflation and last month we entered the process of slowing down inflation.
Monthly inflation 1%
In June, inflation was reported 1%, the lowest number for decades. And we observe that it continues to decrease. We are currently in a period where the exchange rate has been stable throughout this year. Our national currency is the Bolivar. Its value against the dollar has changed only 2% this year. In addition, we are in the process of recovering the national income expressed in the tax collection process, and this has doubled compared to last year and is on track to more increase more.
This means the economy is growing. We had already achieved GDP growth of around 5% last year. This year, even multilateral organizations such as the International Monetary Fund and the World Bank are predicting a growth of over 4%, and we have the perspective that this recovery policy will be realized once again, with the creation of this recovery plan, with the election victory of President Nicolás Maduro.
According to the president, growth will accelerate from the presidential elections on July 28 onwards. Much faster progress will be made by the end of this year, that is, in the second half of 2024, we will have much more satisfactory indicators, which will enable all sectors, productive sectors, especially the non-oil economy, which is blockaded by North American imperialism, to be an alternative to the oil economy. We recently approved a law in the National Parliament to promote non-oil exports, as a major effort by this sector to contribute to national economic growth.
Out of famine
How is this economic growth reflected in the daily lives of employees and consumers? Because economic growth is, first of all, an abstract thing. Where will citizens, employees and consumers see the tangible effects of this recovery?
There are two elements that we think are key to observing or demonstrating this healing process. One of these concerns the increase in economic dynamism in different private production sectors. In Venezuela, for example, we had a pretty serious famine situation seven or eight years ago that affected all Venezuelan families.
As a result of the first attacks on our country at that time, long queues were formed in grocery stores, supermarkets and stores to buy basic products such as flour. Products such as vehicle batteries, oil for vehicles, lubricants and many other essential products for the vehicle fleet to operate were not available in Venezuela.
Today, we see a market where supply is ensured, and 97 percent of food consumption consists of national production. This reduces dependence on imported products for the first time. Here is a concrete result of economic policy.
National income decreased by 99%
Today, for example, we see that on the shelves of Venezuela there are many products, as well as various brands in different fields, pre-cooked flours, rice, coffee, different types of inputs, different products. Venezuelans need it for their daily lives. That’s one aspect of it. Another element that we see clearly is what the Venezuelan has to do with the income of the Venezuelan family.
As we know, the collapse of the national income of the public sector also affected the income of Venezuelans by 99%. In 2009, 2010, 2011, when we had the highest income, the highest salary in Latin America. From then till today, we went from about $380 a month to the minimum wage of $3 a month, $3.8. So, wages fell to 1% of the high income we had before, in the first phase of the revolution. This was the result of the blockade.
Today, we have managed to recover thanks to the economic recovery policy and the social protection mechanisms designed at this stage. There is still a long way to go in this regard, but today all workers have an income mechanism of over $100 per person.
This means that there is a significant increase in terms of minimum living income, and we predict that this income of workers will recover even more solidly in the coming months and following years, with the Bolivarian revolution taking hold in the country and the recovery of national income, through the policy that Maduro is developing. You can already observe this, it is enough to go to any street of any city in our country to see how income increases. Today, consumption, businesses, enterprises are increasing. One of the backgrounds for this relates to access to credit. More and more private sector demands loans every day. We saw a loan increase of over 90 percent in 2023.
What does this mean? This means that businesses that request loans from the financial system do so because the products they offer are likely to be consumed by the public. And this is exactly the reflection of the economic recovery.
Venezuela has managed to reduce inflation. But did it also somehow compromise national sovereignty? Because the Bolivar is side by side with the dollar and even the dollar is widely used in shopping. How do you see this?
One of the decisions taken during the process of this economic recovery plan proposed in 2018 was the possibility of transacting in foreign currencies in retail sales, not only in dollars but also in euros and different currencies. This decision, which we call the escape valve, allowed us to protect ourselves from the effects of inflation.
Already today, the value of the Bolivar is stabilizing, thanks to the anti-inflation policy. This also means that transactions in Bolivar are also increasing. It should be clearly stated that we are not in the process of dollarization of the economy. Dollarization means transferring sovereignty over monetary policy to the US Federal Reserve. This does not exist in Venezuela. Our currency is the Bolívar, and Venezuela’s monetary policy is managed by the Central Bank of Venezuela, which the national constitution established as the governing body of this policy.
So, we come to the process of stabilization of the value of the Bolívar, recovery of the value of the Bolivar, which has allowed us to see a very significant increase in daily payment transactions through these mechanisms, especially through digital ones. It was one of the advances that we made a commitment to about what needs to be done with the digital economy to simplify payment processes. Because we remember that one of the main aspects of the aggression that Venezuela is subjected to in the economic sphere is against our money. Especially regarding paper money. In the early years of the aggression, they stole large amounts of paper money, Bolivar, to reduce the cash or liquidity capacity in the hands of people, that is, citizens. This was offset by the increase in electronic transactions.