Venezuela Inflation Surges to 141% Amid `Economic War'

  • Central bank publishes economic data with emergency decree
  • GDP shrank 7.1% in third quarter of 2015 from year earlier

Venezuela’s central bank published economic statistics for the first time in a year, confirming the country had plunged deeper into recession and that inflation had spiraled into triple digits.

The annual inflation rate ended the third quarter at 141.5 percent, the central bank said in a report published Friday on its website, compared with 68.5 percent the last time they reported the number in December 2014. Gross domestic product fell 7.1 percent in the third quarter from the year earlier.

Venezuela Inflation
Venezuela Inflation

The central bank laid blame for the economy’s plight upon collapsing oil prices -- Venezuela’s only significant export -- and an “economic war” it alleged was being waged against the South American country. President Nicolas Maduro, who addressed an opposition-controlled National Assembly for the first time, said the moment had come to raise gasoline prices and that he would look at adjusting the country’s fixed currency rates in the coming days.

The central bank’s report was published just moments after the country’s newly appointed economy czar, Luis Salas, read an emergency decree signed by Maduro that would grant him powers to dictate economic measures. The powers were needed to protect Venezuela from “speculation” and “fictitious” pricing, he said.

The central bank accused websites that track the street value of the dollar of “destroying prices” and installing a “savage” form of capitalism in the country, adding that 60 percent of inflation was the result of currency manipulation.

Congressional Speech

“The figures are catastrophic,” a defiant Maduro said handing the red-bound decree over to congress, adding that the solution to the country’s problems involved more controls and not a “neoliberal” adjustment. “The spirit of the emergency decree is to bring about a movement to protect the people. I ask the country to support it,” he said while holding the decree.

Discontent over spiraling prices and widespread shortages of everything from milk to cancer medicines helped the opposition wrest control of congress for the first time in over a decade.

“After 17 years, the model has failed,” National Assembly President Henry Ramos Allup said after the president’s speech. “This model is wrong and erroneous, there are the figures and the results.”

‘Terrible Situation’

Despite his recent electoral defeat, Maduro has maintained that his country’s economic woes are the result of a campaign waged by his rivals to oust his socialist government.

Congress now has eight days to examine and debate his decree before voting on its approval, yet many remain skeptical of its reception by a body now controlled by his opponents.

“This is mainly a political tool to put pressure on the opposition and try to share the cost of the crisis,” said Barclays Plc economist Alejandro Arreaza in an e-mailed response to questions.

Speaking for the opposition following Maduro’s three-hour long address, the National Assembly head Ramos Allup sought some measure of conciliation, saying that “it’s not all your fault -- you inherited a terrible situation,” and agreed to study the emergency decree.

Still, the opposition leader largely rejected government claims of currency manipulation and economic war.

‘Key Question’

Many analysts say that the plunge in oil prices will force the beleaguered president to take painful measuring such as adjusting currency controls or raising gasoline prices. On Friday, Venezuela’s oil basket fell to a 13-year low.

“The key question is whether the government will announce a moratorium on debt payments,” Bank of America wrote in research note to clients Friday. “With Venezuelan oil having fallen to $24, the stress on government finances is large enough to strengthen the case for a debt restructuring.”

Maduro said the country would continue meeting its international commitments.

“This year we have to pay $14 billion. They’re obligations. We’ve made them in the past and will keep doing so,” Maduro said.