Scotsman Guide > Commercial > May 2017 > Department

 Enter your e-mail address and password below.

  •  
  •  

Forgot your password? New User? Register Now.

Commercial Department: Beyond Our Borders: Venezuela: May 2017

 

Beyond Our Borders: Venezuela

Plunging oil prices have left oil-rich Venezuela struggling to recover from economic turmoil as it grapples with negative economic growth, hyperinflation and shortages of essential goods and services.

Venezuela’s economy is the worst-performing in the world, according to a report from real estate research company JLL. Analysts estimate the country’s economy contracted by more than 7 percent in 2016. The country is home to roughly 31.8 million people and has the largest proven oil reserves in the world.

The price of Venezuelan oil fell 50 percent in 2015, according to the World Bank, and fell an additional 35 percent in the first eight months of 2016. Oil production contracted by an estimated 10 percent in the first half of 2016.

The country is currently suffering from severe shortages of food and medical services, and the price of groceries is skyrocketing. The country’s inflation rate is soaring.

It reached 800 percent in December 2016 — the highest inflation rate in the world — and many analysts believe the country’s inflation rate could hit 1,500 percent by the end of this year. The country’s currency, the bolivar, is crashing.

Venezuela’s currency has been devalued so much that a small but growing number of Venezuelans are forgoing bolivars for bitcoins — a digital cryptocurrency that can be used to purchase basic goods online. Bitcoin brokerage Surbitcoin.com reported that the number of Venezuelan users on its website skyrocketed from 450 in 2014 to more than 85,000 at the end of 2016, according to Forbes.

With inflation and currency devaluation running rampant, many companies and investors are turning to commercial real estate. Despite government caps on commercial rents, investing in high-end real estate is viewed as a safer alternative in the current inflationary environment than storing money in banks.

As inflation has devastated citizens’ incomes, both consumption and investment in the country has plummeted, the latter causing the country’s capital stock to decrease, the World Bank states. Imports also have collapsed. A severe drought has hampered output and caused an electricity shortage because of the country’s reliance on hydropower. The government has responded by mandating a four-day workweek in the private sector and a two-day workweek for government employees.

Venezuela’s economic unrest has led to other forms of social disruption. Caracas, Venezuela’s capital city, was named the world’s most violent city in 2015 in an index compiled by the Citizens’ Council for Public Security and Criminal Justice.

Although Venezuela’s economy has taken a beating over the past year, the country’s economic crisis isn’t expected to improve in 2017. The IMF forecasts negative economic growth of 4.5 percent this year.


 

Steven Wyble is the former online content editor of Scotsman Guide Media. For questions about this article, call (800) 297-6061 or articles@scotsmanguide.com.

Fins A Lender Post a Loan
Residential Find a Lender Commercial Find a Lender
Scotsman Guide Digital Magazine
 
 
 
 

 
 

© 2019 Scotsman Guide Media. All Rights Reserved.  Terms of Use  |  Privacy Policy