VENEZUELA

Although Venezuela is still plagued by a lingering economic and political crisis, the country was able to withstand the Covid-19 crisis, according to official figures. However, a recent study has shown that the country has averaged just 21.3 PCR tests per 100,000 inhabitants since April — a rate five times lower than that of neighboring countries. The official number of cases and deaths is thus relatively low, but is probably severely underestimated.

Venezuela’s economy has been in a deep recession since 2013, and the crisis has affected all sectors. The past years have seen electricity and water cuts, soaring inflation, price and foreign currency controls, shortages of imported goods and strong state interventionism, which led to foreign investment flight and deterred international companies. As oil accounts for most of Venezuela’s exports and fiscal revenues, low oil prices worsened the country’s economic outcomes. GDP is likely to have dramatically shrunk by -25% in 2020 and should contract again in 2021 before finally recovering. At the same time, inflation is in the quadruple digits, the highest rate in the world. Hyperinflation has been fueled by (i) the high monetization of public debt by the central bank; (ii) the strong depreciation of the currency in both the official and black markets while 80% of goods consumed are imported and (iii) dramatic shortages of basic goods.

Nevertheless, the increased use of the dollar in day-to-day transactions to bypass the dramatic depreciation of the bolivar, as well as waivers granted to US investors in the country, could mean that Venezuela is headed for de-facto dollarization.