Andres Oppenheimer

Venezuela’s inflation rate could reach 1 million percent — Maduro might be happy about it

Venezuelans wait on a long line outside a store when its hours of operation were shortened in 2016.
Venezuelans wait on a long line outside a store when its hours of operation were shortened in 2016. Getty Images

When the International Monetary Fund (IMF) announced its forecast that Venezuela will reach a 1 million annual inflation rate this year, I wondered whether it’s because that country has the most inept government on Earth, or whether it’s pursuing a deliberate policy to encourage the mass migration of government critics.

It probably started out being the first, but I’m starting to think that Venezuelan President Nicolás Maduro’s regime has decided that it’s a good political strategy to allow the economy to collapse and drive millions of disaffected people to emigrate.

After all, Cuba — Venezuela’s closest ally and the country where Maduro travels regularly to get advice and moral support — did precisely that five decades ago, and its dictatorship is still in power. Call it political cleansing, if you want.

More than 3 million Venezuelans — about 10 percent of the population — are estimated to have left the country since late populist strongman Hugo Chávez took office in 1999.

Venezuela’s debacle is the biggest self-inflicted humanitarian crisis in recent memory.

According to the new IMF estimates released July 23, the country’s economic growth will fall by 18 percent this year, and will have fallen by about 50 percent over the past four years. That is likely to continue driving large numbers of Venezuelans to migrate abroad, the IMF says.

When I interviewed the IMF’s director for Western Hemisphere affairs Alejandro Werner hours after the release of his report forecasting a 1 million percent inflation rate for Venezuela this year, he told me that Venezuela’s collapse is worse than almost anything he has seen anywhere in recent decades.

“It’s really a case that has virtually not been seen in any world economy over the past 50 years,” Werner told me. “There have been maybe 10 cases of similar economic contractions, but most of them were associated with armed conflicts or natural disasters.”

Venezuela’s hyperinflation can only be compared with Germany’s inflationary crisis in 1923, and with Zimbabwe’s inflation rates in 2007. There are widespread shortages of food and medicines, and average Venezuelans have lost 15 pounds just over the past year, he said.

Asked how long this situation can last, Werner said that the situation is “unsustainable,” but it’s hard to predict when it will start to reverse itself, barring drastic government measures to restore business confidence.

Maduro’s recent announcement of creation of a new crypto currency, the Petro, “was basically a failed idea,” Werner told me. “Some people thought it would be a Band-Aid, that it would help manage the situation for a few months, but it turned out not to be even that,” he said.

There has been speculation that Maduro will dollarize the economy, much like Argentina, Ecuador and Zimbabwe did after their respective periods of high inflation.

But Werner told me that it wouldn’t be enough to revamp the country’s economy.

As long as Venezuela’s oil production continues to be half of what it was and there are no government measures to encourage investments, “Dollarization is not a solution in an environment in which the fundamentals of the economic downturn continue to be there.”

What about the theory that Maduro may deliberately be allowing the economy to run to the ground, so as to get millions of government critics to leave the country, and remain with a docile population that is dependent on his regime’s food subsidies?, I asked Werner.

“That’s speculative ground, and the institution where I work is not the right one to answer that question,” Werner responded.

My opinion: Maduro may have reached the conclusion that the only way for him to stay in power indefinitely is to get rid of potential foes by driving them to migrate abroad and to send family remittances to their relatives back home.

With Venezuela’s minimum wage at $1.34 cents a month — yes, you read that correctly — exiles only have to send $20 or $30 a month to feed their entire families back home.

It sounds farfetched, but Venezuela’s collapse may no longer be because of sheer incompetence, but to Maduro’s intentional plan to drain the country of opposition for political gain.

Watch the “Oppenheimer Presenta” TV show Sundays at 8 p.m. on CNN en Español. Twitter: @oppenheimera