Inflation Challenges in Venezuela

Inflation Brazil pic
Inflation Brazil
Image: bbc.com

Julio M. Herrera Velutini comes from a family with a 120-year history in the Venezuelan banking industry. Julio Herrera Velutini leads one of the largest financial institutions in Venezuela.

Venezuela is experiencing high inflation, a lack of basic goods, and a devalued currency because its economy is dependent on hydrocarbons. Oil makes up 95% of exports from Venezuela, and more than 50% of its fiscal income is from oil. Now that the international price for oil has fallen from $100 per barrel to under $30 per barrel, millions of people in Venezuela have been affected. Some experts attribute the decline in oil prices in part to the United States, which recently increased its oil production, leaving nations like Venezuela with limited income options.

Venezuelan leaders have stated that they intend to continue investing in national improvements, but with its now limited income, the nation has had to borrow funds to cover its budget deficit. Venezuela is now using its reserved dollar currency to purchase basic goods. These goods are then sold to the public at a subsidized price, and the black market then sells the same scarce goods at much higher prices. Some experts say that Venezuela could default on its obligations in 2016, unless oil prices rebound or one of its allies chooses to help the country.

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