Venezuela in crisis: Protests and economic decline follow election fraud allegations

Venezuela is facing a resurgence of violence and economic turmoil following allegations of fraud in the recent presidential elections favoring Nicolás Maduro. These accusations have ignited widespread protests, resulting in deaths, injuries, and numerous arrests, further destabilizing an already fragile nation.

Protests and political turmoil escalate

The recent presidential elections in Venezuela have been marred by accusations of fraud, sparking protests that have quickly turned violent. Nicolás Maduro’s victory has been called into question, leading to widespread unrest and a heavy-handed response from security forces.

This post-election chaos threatens to exacerbate Venezuela’s already precarious economic situation, which has been struggling with runaway inflation, political instability, and declining oil revenues for years.

Venezuela’s ongoing economic collapse

Venezuela’s economy has been in a freefall, marked by hyperinflation and a mass exodus of citizens seeking better opportunities abroad. Asdrúbal Oliveros, director of consulting firm Ecoanalítica, highlighted that Venezuela’s economy shrank by approximately 70% from 2014 to 2021, hitting its lowest point in history.

Although the country has moved past the hyperinflationary period of 2018-2019, the path to full economic recovery remains challenging. Venezuela’s GDP is projected to reach $102.3 billion in 2024, a stark contrast to its pre-crisis levels.

The national public debt has ballooned to $4.2 trillion by 2023, further compounding economic difficulties. While the official unemployment rate stands at 5.5%, this figure does not capture the widespread underemployment and informal labor market prevalent in the country.

Persistent economic instability

Despite no longer having the highest inflation rate in Latin America—surpassed by Argentina’s over 200% inflation—Venezuela’s inflation rate remained above 50% as of June 2024.

This persistent inflation hampers the well-being of Venezuelans, with the minimum wage stagnant at 130 bolívares (approximately $3.50) since March 2022.

In response, President Maduro announced increased state bonuses in May 2024, including a minimum salary hike, a $40 food bonus, and an increased “Economic Warfare Bonus” from $60 to $90.

The economic crisis has had devastating effects on society, with over 80% of the population living in poverty and 53% in extreme poverty.

This economic hardship, combined with ongoing political and social challenges, underscores the multifaceted nature of Venezuela’s struggle for recovery.

Economic indicators show mixed progress

The Venezuelan Observatory of Finance (OVF) reported a 3.6% expansion in the economy during the second quarter of 2024, up from 2% in the previous quarter, on a year-over-year basis.

However, economist Aldo Contreras noted in an interview with Invezz that while the economy is growing annually, there is a stark contrast when compared to a decade ago. The nation’s GDP has plummeted from $470 billion to an expected $75 billion this year.

Despite modest gains from inflation control and increased commodities output, the economy has seen a significant decline, with economic activity dropping by roughly 75% since 2013.

Contreras emphasized the positive impact of primary sector growth, such as increased oil production and the rising export potential of products like avocados, cocoa, and passion fruit, which have driven steady economic activity.

However, Venezuela still faces the harsh reality of a small-scale economy struggling to surpass previous GDP and nominal per capita levels.

Contreras pointed out that GDP per capita, which once reached $15,500, now hovers around $2,500 to $3,000.

This stark disparity highlights the ongoing effort needed to translate economic advances into tangible improvements in living standards and overall human development.

Venezuela stands at a critical juncture, facing a combination of economic crisis, political unrest, and social hardship.

As the country navigates these challenges, a comprehensive and sustained approach to economic recovery and addressing the needs of its citizens is essential. Long-term reforms and growth across all sectors are crucial to achieving national stability and prosperity.