Is Venezuela finally pulling out of the world's worst economic tailspin?
After a decade of harrowing economic contraction and hyperinflation — and after ending a raft of disastrous polices — Venezuela likely saw growth last year.
Venezuela in recent years has been home to the worst humanitarian crisis in modern South American history — but the country’s wrecked economy may finally be recovering.
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For much of the past decade, in fact, economists called Venezuela’s collapse the worst in the world. Thanks to plummeting oil prices and socialist regime mismanagement and corruption, the economy shrank by 75% between 2014 and 2020. It also suffered one of the worst bouts of hyperinflation in recorded history, reaching almost 3 million percent in January 2019.
Among the tragic results: A fifth of the population left the country; and because of harrowing food shortages, those who stayed lost an average of 24 pounds in 2017, according to one Venezuelan university study.
But authoritarian President Nicolás Maduro — and economic analysts — now claim Venezuela is rebounding. They estimate that last year, the country saw its first economic growth since 2013 (as much as 5.5% in a Credit Suisse report) and its annual inflation rate fall below 1,000 percent.
Part of the reason for the rebound is that moribund oil production saw some recovery as global prices rose again, and the regime was able to invest in the industry's decrepit infrastructure.
But another big factor is that Maduro finally dropped what most economists called his disastrous policies of price and currency controls, which discouraged production and fueled inflation and black markets. He also allowed larger-scale use of the U.S. dollar, which has had a stabilizing effect.
Venezuela's economic comeback, if it's sustained, could create a policy conundrum for the U.S. Former President Donald Trump and current President Joe Biden both hoped tough economic sanctions would move Maduro to accept democratic reforms such as freer and fairer elections. That strategy may be less effective now.