Published by Bloomberg
Over the past three years, President Nicolás Maduro has eased restrictions on businesses, as well as price controls and regulations; last year he dropped the ban on casinos. Most significant, in late 2018, Maduro let the US dollar circulate legally. Almost every data point shows the economy is improving. The country’s gross domestic product is expanding by anywhere from 1.5% to 20%, depending on which economist is forecasting. Hyperinflation officially came to a halt in January. Some of the 6 million Venezuelans who fanned out across Latin America in search of something—anything—better, have started to move back home.
Foreign investors who’ve shunned the country, in part because they fear violating US sanctions, have begun to visit. They’re encouraged by signs of a rapprochement between Venezuela and the US, as well as surging commodities prices. Venezuela has the world’s largest proven oil reserves; it’s a treasure that could grow more valuable as countries turn away from Russian oil after the invasion of Ukraine.
They’re economists from Ecuador: Patricio Rivera and Fausto Herrera, who both worked for their country’s former president, Rafael Correa. The duo has been advising the Maduro administration behind the scenes since 2019. They’ve pushed for the adoption of the dollar, deficit reduction, and flexibility for the private sector. They’d established some of these policies in Ecuador, another dollarized, oil-exporting economy that, like Venezuela, had defaulted on its debts.
Under Venezuela’s vice president, Delcy Rodríguez, relying on the Ecuadorians’ advice, the government has backed away from constant inspections and fines. It eliminated taxes for thousands of imported products, including the raw materials essential to local industry. Within months, empty store shelves filled with imports, often sold more cheaply than those produced locally.
Venezuela was one of the countries in the Americas to slash its deficit during the peak of the pandemic, defying the global trend. The shortfall declined from 30% of GDP to less than 5%, according to Luis Oliveros, an economist and a professor at Central University of Venezuela in Caracas. The government had implemented the kind of austerity typically imposed by the International Monetary Fund, the enforcer of global financial stability.
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