CARACAS: Assessing the extent of Venezuela’s economic meltdown is no easy task.
After all, this is a country that has stopped releasing even the most basic economic data on a timely basis.
Gross domestic product figures haven’t been published since the third quarter of last year. No inflation numbers have been released since December 2014 and other key measures such as balance of payments statistics haven’t been updated in well over a year.
In this context, economists have been filling the void with their own DIY economic models. Last year, Nomura introduced its “Venezuela screwed-up index” and on Monday Capital Economics published its latest Venezuela GDP Tracker.
It’s pretty grim reading. Crushed by falling oil prices, Venezuela, which generates 96 per cent of its foreign income from crude exports, is seen by Capital Economics to be contracting 10 per cent this year.
The consultancy’s GDP proxy measure, compiled by combining the small amount of official data available with independent figures from local agencies on the ground, suggests that Venezuela is currently in the midst of its worst recession in over 70 years.
The pain can be seen across the country’s supermarkets, where shortages of basic goods such as toilet paper and cooking oil have become part of daily life. Lack of faith in the government’s ability to pull the economy back from the abyss can also been seen in the collapse of the bolivar in the black market.
While $1 bought about 100 bolivars on the black market a year ago, these days, it is more like 785 bolivars, as Venezuelans scramble for the safety of hard currencies.
The cash crunch, coming as the South American nation enters the high season for its debt repayments, have rattled investors and many of the country’s bonds are now trading at severely distressed levels.
In a bid to drum up cash, the government of Nicolas Maduro has, among other things, tapped China for loans; agreed to a complex $1bn gold swap with Citi, sold debt owed to it by the Dominican Republic and Jamaica on to Goldman Sachs and sold down its gold reserves.
But these actions have done little to slow the country’s cash burn.
Last month, the central bank revealed that the country’s international reserves dropped to a 12-year low of $15.35bn.
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