By Luinerma Márquez Castellanos
Within the framework of the “Country Perspective 2024” conversations, organized by Medianalisis and the Gumilla Center, economist Luis Oliveros offered an exhaustive analysis of economic development in Venezuela. Together with the moderators of the event, Andrés Cañizález, director of Medianalysis, and Piero Trepiccione, deputy director of the Gumilla Center, the challenges and changes facing the country were addressed.
Oliveros highlighted that the exchange difficulties in Venezuela date back to the 1980s. However, he stressed that The dynamics of the exchange rate, both official and parallel, intensified after the presidential election in July.
“2024 in Venezuela is clearly divided between a before and after July 28. In the first months, the Central Bank reported economic growth of 8.5% with a fixed exchange rate and a low differential. However, after that date, the parallel exchange rate began to skyrocket,” he said.
The economist revealed that in July exchange interventions reached almost 1 billion dollarsa figure significantly higher than that of previous months. However, in the months of August and September, these interventions were reduced to less than half, which generated an increase in the risk premium in the country.
In relation to the supply of foreign currency in the formal market, Oliveros regretted the lack of official figures on the percentage of dollars that come from the State.
“The demand for foreign currency will continue to grow, especially because the number of bolivars in circulation is increasing. If there is no adequate supply in the formal exchange market, people will turn to informal markets,” he warned.
Dependence on oil revenue
Venezuela produces more than 900,000 barrels of oil per day and the economy remains dependent on this source of income, which represents around 90% of national income.
Regarding this, the economic specialist recalled that a few years ago the country produced 3 million barrels per day and that despite this reduction the country continues to depend on oil income. Currently, the vast majority of foreign currency income comes from the supply of dollars from the BCV, PDVSA and transnational companies.
The impact of international sanctions
Regarding the sanctions imposed by the United States and Europe, Oliveros commented that if they limit Venezuela’s access to its natural markets, oil will be forced to be sold to buyers with fierce competition and large discounts.
He stated that even if the operating licenses are maintained, the economic problems will not be resolved and the elimination of these licenses could further aggravate the economic situation and increase the migratory flow.
In their view, sanctions fail to achieve their primary goal of inducing political change.
Recommendations to improve the economy
At the conclusion of the conversation, Oliveros offered a series of recommendations to improve the country’s economic situation.
He highlighted the importance of addressing the needs of the private sector and carrying out an institutional review, “Venezuela needs an independent Central Bank that focuses on controlling inflation,” he stressed.
He also urged to analyze the exchange issue to achieve greater stability and proposed a review of oil legislation, such as the current Hydrocarbons Law. Finally, he highlighted the need to provide bank loans to boost the productive sector.
For more details about the conversation with Luis Oliveros and his perspectives for the economic future of Venezuela, you can access the recording of his participation in “Perspectiva País 2024” on the channel YouTube of Medianalysis.
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**Interview with Economist Luis Oliveros on Venezuela’s Economic Landscape**
*By [Your Name], News Editor*
**Interviewer:** Thank you for joining us, Luis. Let’s dive right in. You recently participated in the “Country Perspective 2024” conversations. Can you summarize the key findings of your analysis on Venezuela’s economic situation?
**Luis Oliveros:** Thank you for having me. The economic situation in Venezuela is complex and has deep historical roots, particularly in the area of currency exchange, which has been problematic since the 1980s. However, I highlighted that the dynamics changed significantly after the presidential election in July 2023. We saw an initial growth of 8.5% reported by the Central Bank with a stable exchange rate, but post-July, the parallel exchange rate began to rise dramatically.
**Interviewer:** You mentioned that exchange interventions by the Central Bank peaked at almost $1 billion in July but fell sharply the following months. What were the implications of this drop?
**Luis Oliveros:** The reduction of these interventions resulted in an increased risk premium for the country. When the government pulls back from stabilizing the exchange rate, it directly impacts the availability of foreign currency. We saw an uptick in demand but a shrinking supply in the formal market, compelling people to seek currency in informal settings.
**Interviewer:** It sounds concerning. In terms of foreign currency supply, what are the challenges you’re seeing?
**Luis Oliveros:** One major issue is the lack of transparency regarding the supply of dollars from the government. We need official figures to understand how much currency is entering the market from state sources. As the number of bolivars in circulation grows, the demand for dollars is expected to rise. If the government doesn’t step in to meet this demand, we could witness further destabilization.
**Interviewer:** You also noted Venezuela’s heavy reliance on oil revenues. Can you elaborate on this dependency and its impact on the economy?
**Luis Oliveros:** Absolutely. Venezuela currently produces over 900,000 barrels of oil per day, which accounts for around 90% of national income. Historically, the country produced three million barrels daily. This significant decrease in production has made us even more reliant on oil than before. Foreign currency mainly comes from the state oil company, PDVSA, and international companies, which makes our economy vulnerable to fluctuations in global oil prices and sanctions.
**Interviewer:** Speaking of sanctions, what impact do international sanctions have on Venezuela’s economy?
**Luis Oliveros:** The impact has been profound. Sanctions have limited access to international markets and financial systems, affecting oil exports and foreign investments. This, in turn, exacerbates our currency issues and further complicates economic recovery. While sanctions are intended as a pressure tool, they often inadvertently affect the economic landscape where the general population suffers the most.
**Interviewer:** Thank you, Luis, for your insights. It seems Venezuela is at a critical junction economically, and it will take careful navigation to forge a path forward.
**Luis Oliveros:** Thank you for the opportunity to discuss these essential issues. The road ahead will indeed require strategic planning and transparency to restore confidence in Venezuela’s economy.
Produces around 900,000 barrels of oil per day, a significant drop from the 3 million barrels produced in the past. This oil revenue constitutes about 90% of the national income, which makes our economic health extremely vulnerable to fluctuations in oil prices and output. The reliance on oil means that any disruption in production or pricing can have drastic effects on the whole economy.
**Interviewer:** You mentioned the impact of international sanctions imposed on Venezuela. How do these sanctions affect the oil sector specifically?
**Luis Oliveros:** The sanctions have severely limited Venezuela’s access to international markets. They force the country to sell oil to buyers who are less favorable and often for deeply discounted prices. Even with operating licenses in place, the challenges in accessing broader markets mean that our oil sector can’t function effectively, which, in turn, worsens the overall economic situation. Ultimately, these sanctions are not achieving their intended goal of political change but are rather compounding the humanitarian and economic crisis.
**Interviewer:** As we look towards potential solutions for Venezuela’s economy, what recommendations do you have?
**Luis Oliveros:** First and foremost, we need to prioritize the needs of the private sector. An independent Central Bank focused on controlling inflation is essential for fostering economic stability. Analyzing the current exchange rate system is also critical for long-term improvements. Additionally, a thorough review of our oil legislation, such as the Hydrocarbons Law, is necessary to attract investment. Lastly, providing targeted bank loans to the productive sector will be vital to stimulate growth.
**Interviewer:** Thank you, Luis, for sharing your insights on this pressing issue. Your recommendations offer a pathway toward stability in a challenging environment.
**Luis Oliveros:** Thank you for having me. It is crucial to address these issues as we look to rebuild Venezuela’s economy for the future.
