Increased United States military pressure has added to economic uncertainty in Venezuela and helped push the country’s long-running inflation crisis to new heights, economists and analysts say, as the bolivar loses value and dollar transactions increasingly move to the street market.
The Central Bank of Venezuela, controlled by the government, has touted a 7% expansion in gross domestic product this year. International institutions and independent economists sharply dispute that figure. The International Monetary Fund estimates growth at roughly 1% and projects inflation will approach 270% by the end of 2025, while some local analysts put year-end inflation far higher.
“It must be said that the battered body of an economy … is experiencing promising moments of recovery.” President Nicolas Maduro said in recent remarks, casting the economy as recuperating after steep declines in previous years. But private economists and market participants warn that the political standoff with Washington is undercutting whatever gains have appeared.
The US military presence has likely helped the bolivar collapse in Venezuela
Since August, the official exchange rate has moved from 133 bolivares to 217 per dollar, a slide the report characterizes as a roughly 60% devaluation. On the parallel market, where most Venezuelans and small businesses now price goods, the dollar trades around 310 bolivares, a gap of about 43% with the official rate that complicates commerce, budgeting, and inventory decisions.
“The attempt by the government to foster stability by injecting dollars into a market is still small to close the gap. … [It] gave results for a time. Now conditions and expectations have changed very abruptly,” said a local financial analyst who asked not to be named because of the sensitivity of the topic in an interview with El Pais. He pointed to rising political tensions with the United States as a driver of capital flight and a shortage of dollars in public circulation.
The government tightly restricts the use of foreign currency, penalizing speculative dollar transactions and instructing formal businesses to charge at the official rate. It has also moved to shut down independent exchange-rate trackers and has opened judicial probes against some people it accuses of “speculating” against the economy.
Venezuela’s bank stopped publishing inflation figures in September
Jose Guerra, a former opposition legislator and economist at the Central University of Venezuela, said the Central Bank stopped publishing inflation figures last September “when it was already heading toward monthly double-digit figures.” He warned that real inflation may be far above official estimates and said some studies put the figure close to 480% annually, adding that a return to hyperinflation is possible. Guerra predicted gross domestic product growth of no more than 2% for the year.
Venezuela’s economy remains a fraction of its former size, roughly 30% of historic levels, after a decade of collapse tied to falling oil production and years of crisis. Production has slowly recovered from the deep slump of the 2010s, and officials say the country now produces and exports just over 1 million barrels per day. Still, oil revenues are strained by international sanctions and discounts that reduce the government’s take from sales.
The political backdrop has grown more fraught in recent weeks as the United States has stepped up military activity in the Caribbean and publicly threatened further action related to regional security and narcotics interdiction. The heightened tensions have fed uncertainty about Venezuela’s economic future, analysts say, and encouraged market participants to hoard or move dollars abroad.
The dollar now sets the terms of transactions in the streets of Caracas
With Venezuela cut off from much international banking, and increased U.S. military presence near the country and with tight controls on foreign exchange at home, economists say the government’s policy toolbox is limited.
Real wages remain deeply eroded, and many Venezuelans rely on remittances and informal dollar transfers for daily expenses. Public services, labor markets, and social indicators have yet to recover to pre-crisis levels despite some easing in shortages of basic goods in recent years.
The prospect of renewed instability has left shoppers, businesses, and investors navigating a volatile pricing environment in which the dollar, official or parallel, increasingly sets the terms for transactions on the streets of Caracas and other cities. As analysts warn of further depreciation and persistent high prices, the economic outlook hinges on politics as much as on policy.