Venezuelan Hyperinflation

The Venezuelan bolivar.

Venezuelan hyperinflation refers to the period of hyperinflation that Venezuela experienced between the mid-2010s and the early 2020s, peaking between 2018 and 2020 when the Venezuelan bolivar, the nation’s currency, effectively became valueless. Hyperinflation has plagued many South American nations over the last century, but the recent Venezuelan example eclipses instances in countries like Argentina, Brazil, Peru and Bolivia. There were several key causes of the hyperinflation, though the country’s reliance on income from petroleum, its accumulated debt and huge levels of corruption and financial mismanagement within the regimes of Hugo Chavez and Nicolás Maduro since the late 1990s are the primary causes. The hyperinflation has led to millions of Venezuelans leaving their country and created what some perceive to be the largest refugee crisis in the history of the western hemisphere.

Venezuelan hyperinflation chronology of events

On paper Venezuela should be a very wealthy country. It has enormous oil reserves, more than any other country on earth, Saudi Arabia included. But while countries like Saudi Arabia, the United Arab Emirates and Norway have used their oil reserves over the past half a century to become wealthy countries with a high standard of living, Venezuela has squandered much of its petroleum wealth through poor mismanagement of the public purse and wide-ranging official corruption. This goes well back to the 1970s, 1980s and 1990s. In particular, over-reliance on petroleum income during the boom in oil prices during the 1970s saw the country begin to accumulate a very large national debt that became problematic when oil prices declined considerably in the 1980s. By then, decades of reliance on oil revenue had created a wholly corrupt political establishment within what had once been one of Latin America’s most promising countries.

The second major factor in assessing how hyperinflation came about in Venezuela is the country’s politics. As far back as 1982 Hugo Chávez, a former army officer turned politician, founded the Revolutionary Bolivarian Movement to try to dramatically alter the political situation in the country. After an attempted coup in 1992, the Movement focused on getting Chávez elected as President of Venezuela, something which was succeeded in by the Movement of the Fifth Republic that succeeded the Revolutionary Bolivarian Movement when Chávez won the 1998 Venezuelan President Election by a substantial margin. He entered office in February 1999.

Nicolás Maduro

Chávez ruled Venezuela for fourteen years, during which time the country effectively became a one-party state, though elections are still held to give a veneer of legitimacy. For the first ten years of his time as president the radical socialist government he oversaw did meet with some successes and the Venezuelan economy seemed to be performing well. However, this is now understood to have been the result of record high oil revenue that bolstered the regime, whereas once the Great Recession began in 2008 and oil demand declined considerably worldwide, Venezuela began to run into trouble based on its mounting debt, political mismanagement, a regime that had become just as corrupt as the one it had replaced in the 1990s, and sustained economic sanctions imposed by the United States on what was perceived as a government that was ideologically allied with Fidel Castro’s Cuba.

Chávez died in 2013, just in time to avoid being overly implicated in the destruction of the Venezuelan economy. It was under his successor, Nicolás Maduro, that the inherent frailties in the Venezuelan economy became apparent. By 2014 Venezuela’s inflation rate had risen to nearly 70% as confidence in the country’s currency and economic system declined. It more than doubled the following year, then reached 800% in 2016 before rising to 4,000% in 2017. The worst years of all were between 2018 and 2020. Economic analysts believe that Venezuela’s inflation rate topped one and a half million percent in 2018 and continued to rise exponentially into 2019 and 2020. There is no certainty though, as the government stopped releasing official figures after 2018 and in any event once hyperinflation like this has set in it is difficult to produce an exact figure. All of this ensured that the bolivar essentially became worthless and the Venezuelan economy reverted to people either using barter to trade goods and services, or using foreign currencies such as the US dollar. Drastic currency controls and reforms in recent years have seen Venezuela’s inflation rate return to something nearer normal by 2022 and 2023, but the damage wrought on the country’s economy and people has been devastating.

Extent of migration caused by Venezuelan hyperinflation

Venezuelan refugees in 2018.

Hyperinflation was not the only economic problem of the Maduro era. For many years Venezuela had enjoyed a comparatively low unemployment level, but beginning in 2015 it began skyrocketing upwards as the currency failure translated into wider economic damage. The International Monetary Fund estimates that Venezuela’s unemployment level rose from 7% in 2015 to 20% by the end of 2016 and reached 35% in the late 2010s at the very peak of the hyperinflation. These figures are estimates. When an economy implodes in the manner which Venezuela’s did people cease keeping accurate records of who is employed and who is not as things like tax revenue and salaries paid in the official currency become largely meaningless.

Owing to the hyperinflation, unemployment and associated economic destruction, millions of people left Venezuela from 2016 onwards. The exact number involved has been extensively debated by analysts and demographers. Most tend to favor a figure of between six and seven million Venezuelans leaving their country between 2016 and the early 2020s. This constitutes the largest recorded refugee crisis in the western hemisphere, eclipsing the migration that ensued from the Mexican Revolution in the 1910s. It has surpassed the refugee crises associated with the Syrian Civil War and the Russian invasion of Ukraine, a striking fact given that major wars were involved in these other instances.

Demographic impact of Venezuelan hyperinflation

The most tangible demographic impact of the hyperinflation of the 2010s is a decline in Venezuela’s population. Prior to the mid-2010s Venezuela had one of the fastest growing populations in Latin America. Back in 1950 there had been just five and a half million people here. It hit twenty million in 1990 and 24 million around the time Chávez came into office in 1999. The population peaked in 2016 at nearly 31 million. However, thereafter, owing to the exodus of people from the country, the population has fallen by a vast number. How low it has gone is unclear. Some sources suggest it only fell to nearly 28 million people by 2021 and has begun to recover since, but if the upper estimates of 7.7 million people leaving the country during the era of hyperinflation are accurate then it seems likely that the country’s overall population fell to around 25 or 26 million.

The other demographic impact has been felt in the countries where the millions of people who left Venezuela from 2016 onwards removed to. We hear most about Venezuelans arriving to the southern border of the United States and indeed there has been upwards of half a million Venezuelans enter into the US over the last decade, but the much greater impact has been in other Latin American countries, notably Colombia, where by some estimates there are nearly three million people of Venezuelan birth, the majority coming since the mid-2010s. Other major destinations include Caribbean nations, with the Dominican Republic alone said to have 140,000 Venezuelans residing there.

See also

• Weimar hyperinflation
• The Great Depression
• The Great Recession

Explore more about Venezuelan hyperinflation

• Venezuela: The Rise and Fall of a Petrostate at the Council on Foreign Relations
• What caused hyperinflation in Venezuela? at The Conversation
• Venezuela Voter Lists, 2006-2007 records collection on MyHeritage

References

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