After the elections on July 28th, the economy in Venezuela is again beginning to suffer in some sectors while in others it remains on the lookout for what may happen in political matters, since this will determine what awaits the country in the coming quarters.
Luz Dary Depablos / Correspondent lapatilla.com
According to the economist from Táchira, Aldo Contreras, a significant drop in economic activity has been seen, “about 40% (of sales) in stores have fallen. This week the Táchira economy is beginning to return to a bit of normality.”
“Sales and purchases are sluggish, the political scenario that defines the economic scenario has led many companies to decide not to open a new branch, or investors not to open a new company, and this has had a very important economic impact. Everyone is expecting that this could lead to a possible mass migration in the coming days,” said Contreras.
How could the migration of Venezuelans abroad affect the country’s economy?
It is a complicated issue, we usually see passports cancelled for politicians, journalists, or human rights activists, but the common citizen, the normal citizen, who perhaps does not have a political life at least on social networks or in communication, has already thought about emigrating. In fact, the number of new passport applications at Saime has begun to increase. There is an increase in demand for airline tickets at Camilo Daza airport (Cúcuta, Colombia), and when one talks to people, some begin to say that they are considering leaving the country again. There are some returnees who plan to return (to the country to which they had initially migrated), and others who had never emigrated, begin to organize their papers to begin to see an option to where they could migrate.
Let us remember that the United States suspended humanitarian parole for Venezuela and by suspending it, this country ceases to be an option through legal means, and with a new government of Panama and in agreement with Colombia it has been stated that the Darien will be closed, a possibility that would be latent there.
The suspension of the social network X, makes it so that economic agents, faced with these scenarios of high uncertainty, migration can once again be an option as a response to political instability.This means that surely in the next few days, between three and four million people may attempt to leave.
Venezuela´s land border will again be the great protagonist of this exodus and we will surely see the arrival of United Nations agencies, of the walkers and of all these scenarios that were experienced between 2016 and 2019, which only stopped with the arrival of the pandemic and with the de facto dollarization of the country. Unfortunately, these could be feasible scenarios.
Could a new recession be generated in the last quarters of this year in Venezuela?
The economic issue is defined by the political issue. This is why the coming elections in the United States are very important, where former President Trump and Vice President Kamala Harris will face a scenario in which this will define whether the sanctions, especially on the oil companies that are currently operating in Venezuela, take on an important role again. Venezuela before the arrival of Chevron was producing 350,000 barrels of oil a day, now it is over 950,000 barrels of oil, which suggests that if the sanctions return, oil income will decrease, there will be a scenario of more inflation, more devaluation, more migration, that would bring less fiscal and oil income to the State, and the economy will be set back a little.
If a political solution is not achieved in Venezuela, would the economy in Venezuela deteriorate?
In economic terms, we are going to go backwards, we are going to remain stagnant, we are going to remain in a closed economy, in an economy where inflation may seem to be under control, because if we could close this year with an inflation of 35%, the reality is that since the economy is not growing, it is not generating new jobs and above all the price level is stable, that is, it is stable and does not generate inflation, but understanding that the price level is already very high. That is to say, a vehicle that costs 25,000 dollars in Venezuela costs 15,000 dollars in Ecuador.
There are many goods and services that, at a comparative level, cost 30, 40, 50 or even 100% more in Venezuela. This suggests that the cost of living in Venezuela will remain the same, but with a scenario of very low salaries and that only private companies, which are the ones that manage to pay average salaries of 250 dollars per month, may also be affected in their cash flow, and with constant migration, this can have an impact on national productivity, on the amount of available labor, on investments. This creates a very complex scenario, very similar to those prior to the 2020 pandemic.
What could be the economic sectors that would not be so affected and that could survive and maintain themselves over time?
The least affected sectors will continue to be services, mainly professional services, especially educational services. We have seen how in recent days schools, courses, and private universities have seen an increase in the cost of their tuition. These are the winning sectors, the food sector and the health sector, especially the pharmacy sector.
However, clinics are being highly affected, as are insurance companies, because the purchasing power is not enough to pay for these goods, these services. The commercial sector continues to be a winning sector.
But if there are fewer consumers in the country, they will be affected by a drop in sales. On the other hand, some sectors that have been reactivated, such as the primary sector of the economy, which is the agricultural sector that is producing the most, would be affected because they would be left without an internal market to sell to.
But since they cannot export because there are monopolies in exports, difficult bureaucratic procedures, and complicated merchandise transfers, this means that this sector could also be affected if exports are not opened and completely de-bureaucratized so that Venezuelan agricultural products can be placed on international markets.
The losing sectors continue to be the construction sector, which has fallen by 100%, and the industrial sector, which does not have sufficient public services such as electricity. On the border, in places like San Antonio, Rubio and Ureña, where it is Sunday every day, one can see the decline in production and trade. So a rather complicated panorama is emerging, which, given the increase in sanctions and the decrease in interconnectivity, social networks and access to information, could have a complex scenario for the last two quarters of the year.