From really awful to worse in Venezuela

Only 236 vehicles were sold in the nation in November

VENEZUELANS have to navigate a labyrinth of queues to buy staples such as sugar or aspirin. They’ve got used to finding that the shelves in shops are empty, a frustration that sometimes boils over into looting. So they don’t really need economic data to tell them that 2016 was a terrible year.

Still, when and if the numbers do come in, they’re likely to confirm a collapse that’s almost unprecedented outside wartime.

The government has long since halted regular publication of GDP figures, maintaining radio silence since February.

But the IMF’s estimate, of a 10% contraction, would make Venezuela the world’s worst economy last year — and that’s towards the optimistic end of the spectrum. Private economists put the drop at as much as 15%.

After the third and harshest year of what now qualifies as a full-blown depression, Venezuela has lost about a fifth of its output. A free-spending government was blindsided by the 2014 collapse in oil prices, which drained the economy of dollars, leaving many staple goods in short supply and pushing inflation to triple digits.

As economists try to pin down the numbers, historians struggle to find parallels for such a slump, at least since the founding of the country two centuries ago.

“One could say this is a wartime economy,” said Jose Manuel Puente, an economist at the Institute of Advanced Studies in Administration in Caracas.

“But this year Venezuela’s numbers are worse than economies at war.”

To be sure, there have been worse performers this decade: Syria and Libya saw their economies shrink by about half amid civil wars, according to the IMF.

But in 2016, Venezuela stood alone. President Nicolas Maduro seemed to acknowledge as much when, on Monday, he said: “2016 was the hardest, longest and most difficult year we have known.”

For a local parallel, you have to go back well beyond living memory, according to historian Tomas Straka.

“In terms of phenomena such as massive emigration, hunger and abandonment of homes, this is only comparable with the War of Independence (1810 to 1823),” said Straka, who teaches at Andrés Bello Catholic University, named after a contemporary of the revolutionary leader Simón Bolívar.

Although the current devastation is on a smaller scale, plenty of Venezuelans have fled the country, and many who stayed behind go hungry.

At the bakery he runs in the capital’s eastern district, Douglas Palencia, 40, says he’s producing about half as many loaves as in 2014. The scarcity of wheat is his biggest problem, but other ingredients sometimes run out, too.

“Every day it feels like we’re missing something else,” he said. “We’re constantly cutting. Everything goes down: quantity and quality.”

Shortages are driven by the government’s rationing of dollars: it’s trying to preserve them for debt payments instead of spending them on foreign goods.

Maduro said last week that imports plunged to $17.8-billion last year. That’s about half the 2015 level, according to Torino Capital’s estimates; there’s no official figure for that year.

The policy is wreaking havoc among the biggest businesses as well as family firms such as Palencia’s bakery. Ford Motor Company said last month it would halt production in Venezuela until April.

Car sales are the kind of data that economists often turn to when trying to piece together an estimate for GDP in the absence of proper national accounts, Puente says. And in Venezuela’s case, they reveal an economy that’s nearly at a standstill.

Only 236 vehicles were sold in the nation of 30 million in November; a decade ago, the domestic industry was producing more than 12 000 a month.

Another favoured proxy is electricity consumption; but Venezuela’s power industry suffers from regular rolling blackouts, and may not be a useful measure anyway, because electricity is subsidised to the point where, when available, it’s practically free.

Whatever the difficulties of measuring Venezuela’s decline, few economists think it’s over. The economy is set to shrink another 2.4% this year, according to the average forecast in a Bloomberg survey; the IMF says 4.5%.

“Shortages are going to be as bad or worse,” Puente said. “And that’s the optimistic scenario.” — Bloomberg