Aldo Contreras, a Venezuelan economist, indicated that the country’s economic recovery will require concrete and sustained actions over a period of between 5 and 10 years.

In his opinion, certain conditions are fundamental to moving toward recovery:

• Restoration of legal certainty.
• Reactivation of bank credit.
• Return of financing from multilateral organizations.

These three aspects are crucial if the country wants to “reverse its productive collapse, whose economy has contracted by 75.8 % in the last decade,” which will not be possible in the short term or through isolated measures.

Contreras mentioned that the interest rate adjustments recently announced by the Central Bank of Venezuela (BCV) are insufficient given the magnitude of the macroeconomic imbalances.

“Setting savings returns close to 40 % annually does not incentivize deposits in bolivars when year-on-year inflation exceeds 530 % and monetary liquidity is growing by more than 200 %,” the economist emphasized.

On the other hand, he referred to the rise in credit rates, which reach up to 60 % annually on credit cards, resulting in higher prices for essential goods in households. Furthermore, the measure does not halt “the loss of purchasing power as long as the fiscal deficit continues to be financed through monetary issuance.”

He referred to the recently reached oil agreements and insisted that a gap exists between energy megaprojects and the daily microeconomy. They help create jobs and bonuses, but they have no impact on the lives of ordinary citizens; nor do they translate into widespread growth in Gross Domestic Product (GDP), nor do they resolve the loss of purchasing power for families, who currently face a food basket costing $750 per month.

Regarding international financing, Contreras mentioned the gradual reintegration of “institutions such as the International Monetary Fund (IMF) and the Inter-American Development Bank (IDB)” as a key element to address the “deterioration of infrastructure, although definitive reactivation will depend on the restoration of institutional certainty.”

M.Pino

Source: finanzasdigital

(Reference image source: Towfiqu barbhuiya on Unsplash)

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