A top International Monetary Fund economist says Venezuela could reach “total economic collapse” in 12-18 months
A recent IMF report predicts that Venezuela will reach a 720 percent inflation rate this year - the highest in the world. Robert K. Rennhack, deputy director of the IMF’s Western Hemisphere department, stated in an interview that Venezuela is on a path to hyperinflation, and could reach a “total collapse of the economic system” in 12 to 18 months if there are no changes in economic policies.
“Inflation in Venezuela probably entered a hyperinflationary path in 2015,” Rennhack says. He expects Venezuela’s inflation to reach 2.200 percent in 2017, and could balloon very fast to 13,000 a year, the stage that most academics define as full-blown hyper-inflation.
No Latin American government in recent memory has been able to survive a hyper-inflationary crisis. When you reach five-digit inflation rates, governments either make a dramatic political u-turn, or they fall.
Asked how he reached his 12-18 month projection for hyper-inflation in Venezuela, Rennhack said his team of economists looked at previous episodes of hyper-inflation in Bolivia (1982-1984) Argentina (1989-1990) and Brazil (1989-1990). They concluded that Venezuela is on a similar path as these countries were between 12 and 18 months before their hyper-inflationary crises.
Many Venezuelans believe the country will explode much sooner than in 12 to 18 months. Prices go up daily, supermarket shelves are near empty, there are growing electricity shortages, El nino has caused serious water shortages, hydroelectric power supply has gone into the decline, leading to huge power cuts, and government offices being run for only 3 days a week to save power, while the working week has been reduced to 4 days. Crime statistics are skyrocketing.
Since Maduro took office after a dubious election in 2013, the economy has collapsed from a 5 percent growth rate that year to an 8 percent contraction in 2016. Most importantly, poverty has ballooned from 23 percent to 73 percent of Venezuelan households over the same period, according to a joint study by the University Andres Bello, the Central University of Venezuela and the Simon Bolivar University.
Venezuela’s petro-diplomacy has lost its clout in the region with the collapse of oil prices, and Latin America’s political map is changing fast, moving away from Venezuela’s corruption-ridden socialist model. A collective regional move under the OAS Democratic Charter to demand a constitutional solution to the Venezuelan crisis would be much better than a military coup, which — no matter which side it comes from — would mark a return to the dark ages of Latin America’s military regimes.
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