Congratulations, Venezuela! Your inflation rate is down to 135,000%!

Havana

Over the years, we’ve written a good deal here about the western hemisphere’s cozy Commie tag team. We’re referring, of course, to the so-called Republic of Cuba and the so-called Bolivarian Republic of Venezuela, each of which, through various actions, helps keep the other’s totalitarian system in place. Now, however, both of these tyrannies are undergoing dramatic changes. On September 13, Reuters reported that Cuba was experiencing a fuel shortage. “Cubans,” wrote Nelson Acosta, “queued for hours for public transport on Friday at peak times in Havana, sweating in the heavy heat, while queues at gas stations snaked several blocks long.”

PDVSA headquarters

The Cuban government blamed this crisis on the Trump Administration’s enhancement of U.S. efforts to block imports into Cuba – including oil shipments from Venezuela – and Trump’s new sanctions on Venezuela’s famously corrupt national oil company, PDVSA. Acosta noted, however, that it can’t all be blamed on Trump: Venezuelan oil imports into Cuba have been on the decline for years, obliging the Havana government to ration energy. Which means, among other things, shutting off streetlights and reducing “the use of electricity in state-run institutions,” whatever that entails.

Nicolas Maduro

Meanwhile, what’s up in Venezuela? According to a September 17 article in the Wall Street Journal, the Maduro government has responded to that country’s economic death spiral – a consequence of socialist policies introduced by the late Hugo Chavez – by “quietly and cautiously begun implementing free-market policies” in order to “correct an economic contraction worse than America’s Great Depression.” That’s putting it mildly: the situation in Venezuela makes The Grapes of Wrath look like Keeping Up with the Kardashians.

What exactly has the Maduro regime done? It’s “scaled back its once frenzied printing of money, nearly ended frequent salary hikes, and largely stopped enforcing the price controls that had led to dire food shortages and a thriving black market.” As the Journal ‘s Kejal Vyas observes, these are significant actions “for a government that has publicly championed its state-led, socialist economic model as the country’s only salvation from greedy capitalists.”

Venezuelans in a supermarket queue

In any event, the new policies are having an impact – kind of. The hyperinflation rate, wrote Vyas, has dropped “from seven to six figures.” To be specific, “Inflation has fallen from a peak 12-month rate of 2.6 million percent in January to 135,000% in August.” Now, that kind of inflation rate is still terrifying, but, okay, it’s better than seven figures. Just like it’s presumably better to be hit by a car going 60 miles an hour than by a train going 200.

To be sure, it’s news that the Maduro gang is finally seeing the light – sort of. It remains to be seen whether this implicit acknowledgment of the power of the free market will lead to changes in the regime’s rhetoric. Somehow we doubt it. Maduro has been rhapsodizing over chavista ideology so ardently for so many years that it’s hard to imagine him actually admitting that he’s been wrong all along.

Sergi Lanau

In any event, Vyas quotes Sergi Lanau of the Institute of International Finance in Washington to the effect that Maduro’s new measures aren’t exactly leading Venezuela out of the woods. “Is this a turning point? I would say no, definitely not,” said Lanau. “Who knows in a few months if the decision will be ‘Well, we need money again. Let’s print some more.’” In any event, despite the significant drop, Venezuela’s inflation rate remains the world’s highest. Even as America’s economy goes from strength to strength, the economies of the two totalitarian enemies on its doorstep continue to be basket cases.

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