Given how crazy the hyperinflation has been, that could easily be just a factories payroll, sadly.
Frankly, I'm dubious about anything the Venezuelan government says, as are my Venezuelan friends.
Seems much more likely that this is a classic case of a oil export dependent government being hit by low oil prices and being unable to implement spending cuts (understandable given the political consequences).
I can appreciate the cynicism your Venezuelan friends have about their government, they don't seem particularly competent or completely trustworthy.
However, if you put yourself if Maduro's shoes, what would you do differently? We're not going to make things better until we start thinking of the problems in that way.
Get a team of high level economists in your central bank and economic advisory board.
Start with curbing hyperinflation. That's been done before several times. Do what is known to work. There are some macroeconomic PhDs whose wet dream is to have a case so clear cut like this where they can make a difference. Put them in your central bank and have them get to work.
Remove price controls right away on just about everything that is price controlled. Same for supply control/management.
Get the minimum wage back down. Hell put it too low until you have a partial equilibrium to intuit a "correct" MW level to base it on.
First, stop all attempts to control the exchange rate. The moment you have an "official" and "unofficial" exchange rate for a currency, you're going to have a black market cashing in on the difference. Just leave the rate to stabilize by itself, at whatever level the market is willing to pay for it.
Second, stop regulating prices for any goods for which there is a deficit. If the price is artificially low, that causes a deficit, because the aforementioned black market will use all means available to buy products at those low prices, and resell them at the real prices.
And none of this is rocket science. These two things are exactly what had to be done in the USSR to get anywhere (and, like Venezuela, they persisted in refusing to do them for a long time, making the problem worse and worse).
Maduro would be better off telling the truth rather than destroying what trust is left in government via silly lies: Venezuela has relied too heavily on oil exports, and the drop in oil prices is bankrupting the country.
Venezuela's real problem isn't just relying on oil exports; it's more about the leadership living in a fantasy land where they ignore realities of economic policy. For instance, they fail to understand or to admit that price controls have other impacts, and that when a bakery is forced to sell bread at below the cost of manufacture, the resulting shortages are not because of a counter-revolutionary conspiracy.
Maduro and his friends are sticking to power by any means, and we've seen this before in other countries (like Zimbabwe) and we'll see it again elsewhere. Fortunately not in that many countries.
Resign and allow an economically sane government instead of a communist former bus driver to run things. I know he loves power but you'd think he could look at the food lines and horrific hospitals and admit someone else might be better qualified.
Merely allowing normal currency free currency trading rather than the strange mess they have at the moment and dropping price controls would fix a lot of the problems. Also allowing largely free trade and freedom of doing business and charging a normal market price for gas would help.
They could also apologize to the likes of Maria Lourdes Afiuni and try to reinstate rule of law and return some of the confiscated businesses to their owners.
Venezuela used to be the richest country in South America and has possibly the worlds largest oil reserves. It's taken some impressively bad governance to get it to its present state.
Stop running the printing presses. Venezuela's hyperinflation is caused by one thing and only one thing, Venezuela is just printing money as fast as it can.
> Venezuela's hyperinflation is caused by one thing and only one thing, Venezuela is just printing money as fast as it can.
Okay, then how are you going to "borrow and spend on public infrastructure"? Where is that money going to come from? If you're not going to print it now, you can float a bond, but that bond is going to be backed buy the promise of future solvency. And investors have very little reason to have faith in the future solvency of that government, which means we're back to either printing money to fulfill the bond or defaulting.
> Okay, then how are you going to "borrow and spend on public infrastructure"? Where is that money going to come from?
Countries suffering from hyperinflation don't borrow and spend on public infrastructure. They run the printing presses to make money so they pay off the military, police and their high level supporters to stay in power.
> If you're not going to print it now, you can float a bond, but that bond is going to be backed buy the promise of future solvency.
No one is buying bonds from a country suffering from hyperinflation. That would be crazy.
Unfortunately for Maduro, the only way to solve this problem is to replace the government, introduce a new currency and stop running the printing presses.
Okay, it's not THAT simple, but it is a good start.
The only option after abdicating your dictatorship (if that's what he'd do after telling the truth), is to flee the country. If you stay, you'll be killed.
Jail all communists. Cut expenses by factor of 3x. Introduce a stable currency (e.g. «equivalent of 1 USD» - equo). Force creation of new small firms by providing government couching and assistance, while also reduce taxes for them to bare minimum — small business can soak lot of unemployment for free. Rely on large business to cover government expenses, but be realistic: no taxes means no expenses.
PS.
Moreover, remove all regulations and restrictions which are not vitally important. It's equivalent of turn off of all consumers of electricity when starting of a car engine.
I won't deny atrocities have been committed by communists, but let's not forget plenty of atrocities have been committed by capitalists too. Plenty of wars have also been fought by capitalist countries over material wealth. There has also been violence committed by proxy, the CIA alone has had its hand in numerous regime changes throughout the world, often favouring regimes that kept their people in line with violence.
I suppose the question then becomes what links the atrocities committed by communists and capitalists. Perhaps it's a power thing?
Let's look at what happened in Chile as one example, where you had Salvador Allende replaced by General Pinochet. Considering both of their records, do you think the CIA did the right thing in this case?
Possibly. However, I suspect the problems in Venezuela aren't just with hyperinflation. In any case, leadership that the people can trust will be a good start.
It's more than that: it's the government doing anti-market things such as forcing stores to sell products below cost, then lamenting that shortages are happening. That government has no concept of basic economics. Central planning has never worked -- ever. They need to read more Adam Smith and less Karl Marx.
That may be true, but many other countries are weathering the storm of falling oil prices just fine. Venezuela simply doesn't have enough of a free or business friendly economy to allow them to diversify enough. If Maduro came out today and said "all price controls are off, all taxes are cut in half, all business regulations are on hold for 1 year", things would rebound very quickly. It would take awhile to generate food but once that trains starts, to the extent that the government and crime don't interfere with it their people will have no problem finding food.
> Venezuela simply doesn't have enough of a free or business friendly economy to allow them to diversify enough. If Maduro came out today and said "all price controls are off, all taxes are cut in half, all business regulations are on hold for 1 year", things would rebound very quickly.
This is not Venezuela's problem. The problem is that Maduro is trying to control capital flight by fixing the exchange rate. The currency is not free floating and when companies want to buy goods overseas, they have to go to the government and ask permission to exchange their Bolivars to Dollars. This causes two problems, the government is really slow to approve the conversion of Bolivars to Dollars and the exchange rate does not reflect the real world value of Bolivars. Every time someone exchanges Bolivars to Dollars, the government loses a lot of money. The government does not want this to happen so they are not approving a lot of outbound capital. The import business has ground to a halt because of this.
It's not that easy. Venezuela was blocked from access to the financial market by an US-american Hedgefond together with a private court in the aftermatch of the 2008 crash. Add to that the failing oil price. While Venezuela strived to be a socialist country before, part of what happened later was pure necessity.
I really haven't read anything about that. In fact, Venezuela has been issuing debt bonds without any blocks. Are you sure you are talking about Venezuela?
Oh. That's embarrassing, I think I mixed it up with the situation in Argentina. Venezuela did have problems to access the financial market and it does explain some recent anti-capitalist measures, but that was not directly related to an earlier hedge fond ruling as I was convinced, it was a more simple case of not paying because of having too much debt. It it related to the argentinian situation, but not the same. Source: https://www.weforum.org/agenda/2016/10/restructuring-venezue...
I wonder whether there was an earlier situation like that for Venezuela that got resolved beforehand, which would explain why I remember differently, but I found no source for that. Maybe the ISDS rulings against it. I'd delete the comment above if I could.
> Venezuela was blocked from access to the financial market by an US-american Hedgefond together with a private court in the aftermatch of the 2008 crash.
https://www.youtube.com/watch?v=p23Fn1LVGv0