Venezuela’s Slow Economic Recovery Leaves Poorest Behind

Image caption, Sixteen-year-old Aray runs an ice-cream parlour to help her mother make ends meet
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After eight years of economic crisis, Venezuela’s economy is showing a few signs of recovery.

But as BBC News Mundo’s Norberto Paredes reports from Caracas, while some of those living in the capital’s poorest neighbourhoods are trying to make the most of the new opportunities opening up, many have yet to feel the benefits of the apparent economic rebound.

“I was about to turn 15 and I wasn’t sure if I wanted a party, a present or just the funds to open a small ice cream shop,” says Aray Arias Torres of the decision that led her to become one of the latest young entrepreneurs to set up shop in Barrio San Blas, one of Caracas’ most dangerous neighbourhoods.

Foregoing the traditional party held in Venezuela when a girl turns 15, Aray decided to use the money gifted to her by friends and relatives to “help my mum and family make money”.

She set up a little ice cream parlour where she sells sorbets at prices ranging between $2 (£1.63) and $8 (£6.51).

Aray's ice-cream parlour in Petare, Caracas.
Image caption,

Aray has named her little shop Araice

Venezuela’s national currency is the bolivar, but during a four-year period of hyperinflation, it became almost worthless.

While the government says that the yearly inflation rate dropped from 686% in 2021 to 234% in 2022, it remains one of the highest in the world.

Unsurprisingly, those who can try to get hold of more stable foreign currencies instead. But strict foreign currency controls put in place by former President Hugo Chávez meant that until recently they were beyond the reach of most Venezuelans.

View of street in Petare
Image caption,

Petare has yet to see the benefits of economic recovery

A loosening of the currency controls in 2019 by Nicolás Maduro, Chávez’s successor in office, has led to what some call a de-facto dollarisation.

Many shops, like Aray’s ice-cream parlour, display prices in dollars above those in bolivars and prefer to trade in the US currency.

But this has created a two-tier society in which the minority of Venezuelans who are paid their salaries in dollars, or who receive remittances from relatives abroad, can afford luxuries which those paid in bolivars can only dream of.

The minimum wage for workers in the public sector – Venezuela’s largest employer – is 130 bolivars per month (about $6; £4.85), which means that Aray’s sorbets are only affordable to a select few.

Nevertheless, the government has been boasting about the economic growth the country is experiencing.

It says that in 2022 the economy grew 15%, thanks to rising oil production along with President Maduro’s decision to relax price and currency controls and allow more transactions in foreign currencies.

The Economic Commission for Latin America (Cepal) puts that growth at a more modest figure of 10%. But either way it is undeniably a surprising turnaround from the eight previous years, in which Venezuela’s gross domestic product is estimated to have contracted by more than 75%.

But economist Luis Vicente León warns that while the economic rebound is noticeable, it has not been felt by everyone.

“It is growth that is concentrated, as usually happens, in the non-tradable sectors of the economy, that is, commerce, services, technology, distribution, and health,” he explains.

“Neither all sectors, regions, nor all social classes have experienced growth in a the same way,” adds Mr León, who is president of the Caracas-based research firm Datanálisis.

Scraping by

María Cayone, 41, is one of those who has yet to see any change to her life.

“Where has the economy improved? For whom?” she asks, sitting outside her home along with her two youngest children in the impoverished Petare neighbourhood.

“People here in Petare have turned to the informal economy,” she says while sitting at a makeshift stall in front of her house from which she sells homemade ice cream and wafers.

María's stand
Image caption,

María has a stand selling wafers and ice cream outside her home

María, who has six children, explains that she earns very little selling food on her doorstep. But she argues that by working from home she at least does not waste money on public transport.

She says that the most she could expect to make in a month, were she to take a job in the city centre, would be $20, which would not even cover the $2 daily fare to take her there.

María’s situation is far from unique. A recent survey by the Andrés Bello Catholic University revealed that while the number of those living in poverty in Venezuela had fallen from 65.2% in 2021 to 50.5% in 2022, income inequality had continued to widen.

The poorest 10% in Venezuela survive on just $8 a month, compared to $553 for the country’s richest 10%, explains researcher Luis Pedro España, who worked on the Living Conditions Survey (Encovi).

According to the same report, Venezuela is now the most unequal nation in Latin America.

That inequality is clearly visible in Petare, where Yeidis Morales has turned her garage into a small restaurant.

Yeidis Morales in her restaurant "El Sazón de Margarita"
Image caption,

Yeidis Morales in her restaurant “El Sazón de Margarita”

The prices she charges for a combo of soup, main dish and juice are not affordable to everyone here. The only two customers that lunchtime, two teenagers, turned around and left as soon as they heard that lunch cost $5.

Yeidis says that business fluctuates – sometimes she sells as little as one lunch per day, while on good days she serves up to 15.

Prices for shop-bought food in Petare also rival – and sometimes exceed – those in many European capitals such as Madrid or Lisbon.

In local shops, a kilogram of chicken fillets costs about $4.50, a local cheese around $5, and a litre of fresh milk $2.30.

Former bus driver Miguel Ángel García, who lives off his $6-monthly pension and a remittance of $100 his daughter sends him every month from neighbouring Colombia, thinks it will take a long time for the country to get back to normal.

“Venezuela is finished and it will take many years before it gets better,” the 72-year-old says.

Economist Luis Vicente León agrees that the Venezuelan economy still has “very long way” to go to recover.

“Venezuela would have to grow 346% to recover the lost ground. It would need 20 years of great economic growth for it to have the economy it had in 2013.”

The economist also warns that if the government does not solve the country’s underlying economic problems, growth is likely to slow down and stagnate.

Restaurant "El Sazón de Margarita" in Petare, Caracas.
Image caption,

Business at Yeidis Morales’s restaurant has been up and down

“You cannot deny that the economy is growing… but if you look beyond the areas where there have been improvements, you see a country still in ruins.”

But there are some, like Aray, who are more optimistic about the future. She hopes that her ice cream shop will flourish so she can fulfil her dream of opening a café and maybe even a business for her mother.

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