Collapse of Venezuela government is a matter when and not if

The final collapse of the Venezuela government is a matter of when and not if. Also, the when will probably be in some number of months

Juan Barreto at Foreign Policy magazine writes:

Venezuela is not the first developed country to put itself on track to fall into a catastrophic economic crisis. But it is in the relatively unusual situation of having done so while in possession of enormous oil assets.

The Venezuelan government doesn’t claim to be full-fledged in its devotion to Marxism-Leninism. It has been pursuing as absurd an economic policy mix as its Soviet predecessor. It has insisted for years on maintaining drastic price controls on a wide range of basic goods, including food staples such as meat and bread, for which it pays enormous subsidies. Nonetheless the Venezuelan government, like the Soviet Union’s, has always felt it could afford these subsidies because of its oil revenues.

Maduro seems intent on printing money like crazy, so the next step will be hyperinflation. Inflation is already believed to have reached 700 percent a year, and it is heading toward official hyperinflation, that is, an inflation rate of at least 50 percent a month.

…politics might be difficult to predict, the main features of a severe economic crisis are quite predictable.

The economic demise of the Soviet Union offers a likely scenario for Venezuela’s future evolution. The financial crisis is likely to worsen because any significant change in policy would imply an admission by Maduro that his policies had been wrong, which would probably lead to his ouster. Thus, the budget deficit, shortages, inflation, exchange rate fall, and public debt are likely to grow much worse.

One alternative could be a preemptive political overthrow of the Maduro regime fueled by public discontent or that the rulers just flee the country. Another possible endgame would be that the country runs out of international currency reserves and defaults on its foreign debt. That would deprive Venezuela of all foreign credit, and the natural consequence would be a complete collapse of imports and the exchange rate of the bolivar, the country’s currency.

The Maduro regime is not likely to survive for long because it won’t be capable of making the necessary adjustments that avoid abject economic misery for most of the population, and the pressure on it will eventually become intolerable.


Don’t miss the latest future news

Subscribe and get a FREE Ebook