Venezuela’s Economic Recovery: Why Are the Poor Becoming Poorer?
Image courtesy of Jorje Campos via Unsplash
Venezuela has been struggling with an economic crisis for the past eight years. Venezuela’s economic recession was so severe that the bolivar, the nation’s currency, was worth close to nothing as a result of hyperinflation. While this inflation has dropped significantly, from 686 percent in 2021 to 234 percent in 2022, Venezuela still has one of the highest inflation rates globally. As a result, Venezuelans can acquire foreign currencies that are more stable rather than depending on the bolivar. Until recently, few Venezuelans were able to receive foreign currencies due to former President Hugo Chavez’s sanctions. Once the Maduro regime replaced Chavez as Venezuela’s president in 2019, the controls on foreign currencies became less severe. Currently, many stores and businesses price their items using United States currency and favor the use of dollars. However, even as the country’s economy begins to recover, the poor are falling deeper into poverty.
Venezuela’s claims of economic growth are correct, as shown by the economy’s growth in 2022—an estimated 10 percent to 15 percent growth as a result of increased oil production. Since the war in Ukraine has limited oil production elsewhere, the world has turned to Venezuela. As such, this growth is not attributed to better management by the government. The majority of Venezuelans still do not have access to United States dollars and must use Venezuelan bolivars, leaving them excluded from the country’s economic growth. The Venezuelans who have access to US currency, either from salaries paid in dollars or from receiving dollars from family living abroad, are able to afford much more than those left to use bolivars, which have less value than foreign currency. Only a fraction of the population who have access to US currency can afford even seemingly small pleasures, such as ice cream.
Despite the turnaround, the recent economic improvement has not benefited many Venezuelans. Many Venezuelans cannot afford to take public transportation to formal jobs. As such, they work informal jobs at home, keeping them stuck in poverty. The number of people living in poverty has decreased from 65.2 percent in 2021 to 50.5 percent in 2022, but the gap between the two economic tiers is increasing immensely. Venezuela's poor live on an average of only $8 USD per month, while the rich earn, on average, $553 USD each month.
Inequality was far less extreme in other periods of Venezuela’s economic crisis. One particularly notable decade of Venezuela’s recession was the 1990s. During this time, the country’s government was different from today’s administration. Inequality was far less extensive prior to the years of mismanagement under Maduro that degraded the economic system and set Venezuela up for greater future failure.
Before Nicolas Maduro’s government was put in place, Venezuelans had far greater access to medicine, toiletries, and food than they do now, even while poverty rates and inflation were increasing in the 1990s. They never faced the levels of unaffordability and shortages of food and medicine that they do today. Maduro and his authoritarian government claimed complete control over the economy and market regulation. The strict control, in combination with outside sanctions and blocks on imports, left the nation with severe shortages that disproportionately affected the poor. While the United States has recognized the part it played in Venezuela’s poverty levels and lifted its sanction in 2021, domestic controls remain in place.
While Venezuela’s infrastructure for the rich has recently expanded, giving elites access to high-end fashion stores, expensive nightclubs, and extravagant restaurants, most of its population falls further into poverty, turning Venezuela into a “hellscape of inequality.” Impoverished households fall victim to food insecurity, water shortages, power outages, underfunded education, and lack of access to transportation on a regular basis. There are no public policies to fix these issues or any public funding directed to addressing them. The Maduro administration’s “customs-to-your-table” policy stands to benefit only the richest Venezuelans, as imported goods go directly to consumers and sanctions on the oil industry remain corrupt. By benefiting only a minority of the country’s industries, Maduro’s policies have blocked the majority of Venezuela’s population from reaping the benefits of the economic rebound.
During the 2010s, Venezuela had the lowest inequality in Latin America. Now, it is the highest. The richest 10 percent of Venezuelans earn 70 times more than Venezuela’s poorest 10 percent. The working class is also closer to being poor than being anywhere near rich, and Venezuela now has the second highest rate of malnutrition in the Americas. Despite Venezuela’s exit from the recession, it will take years of work before the majority of the population reaps the benefits of the economy's recovery. Without a solution to Venezuela's underlying economic issues and inequality, it is highly likely that the current economic growth will come to a stop.
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