Canning Paper | Venezuela – Where to from here?

Venezuela – Where to from here?: Canning Papers

06th Mar 2017

This paper examines the current state of play in Venezuela, starting with an overview of the economy, the political situation and current societal issues, with the input of freelance analyst Kate Parker and Francisco Toro of Caracas Chronicles. It then examines potential scenarios and their implications for the economy and the business operating environment. A near-term improvement in the internal situation is not considered likely. The authors anticipate authoritarian consolidation this year, ahead of a heavily-managed presidential election in late 2018, and little change in economic policy. Absent reform, the economy will remain in a critical condition, but with oil prices sufficiently stable to avert a complete collapse.

State Of Play: The Economy

Venezuela has become a byword for economic crisis in the Americas. No other country in the region has experienced political involution, institutional decay and economic collapse on a similar scale in recent memory. It is difficult to quantify the crisis with any degree of precision, because the central bank (BCV) and the finance ministry have all but ceased publishing macroeconomic data. Information comes out in dribs and drabs. The BCV reported an annual GDP contraction of 5.7% in 2015, with inflation of 181%. A BCV report shown to Reuters by an anonymous source on 20 December 2016 included a preliminary estimate that GDP had contracted by an eye-popping 18.6% year on year, with inflation purportedly running at 800%.

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