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Venezuela Declares an Economic Emergency and Releases Data Showing How Bad It Is

Venezuela's socialist government has decreed an "economic emergency" and published the first data in a year showing the depth of a recession fueled by low oil prices and a sputtering state-led model.

by Reuters and Victor Amaya
Jan 16 2016, 1:02am

Photo by Miguel Gutierrez/EPA

Venezuela's socialist government decreed an "economic emergency" on Friday and published the first data in a year showing the depth of a recession fueled by low oil prices and a sputtering state-led model.

The government's decree, which the opposition-led congress says it has the power to approve or reject, sets a 60-day "economic emergency" and would give President Nicolás Maduro wider powers to intervene in companies or limit access to currency.

Related: The Hard Left Team Venezuela's Maduro Just Appointed to Tackle the Country's Crisis

The central bank, which has been lambasted by critics of the government for hiding statistics since the end of 2014, said the South American OPEC nation's economy shrank 4.5 percent in the first nine months of last year.

Inflation soared in that period to an annual rate of 141.5 percent: the world's worst.

The news coincided with President Maduro delivering his annual message to a newly-elected National Assembly that is controlled by the opposition for the first time in 17 years.

He did not mention any possible policy changes such as a rumored currency devaluation or hike in the price of heavily-subsidized fuel.

Related: The Opposition Wins a Landmark Victory in Legislative Elections in Venezuela

Luis Salas, the newly appointed the vice president of finance, asked Venezuelans to be "confident" that the government will solve the lack of basic goods that the country is facing. Salas said he will focus on bringing "consumers closer to producers in order to reduce the anomalies that take place along the distribution line." He said his aim is not only to produce more, but to "democratize production."

"We want to reaffirm the trust of the Venezuelan people in the revolution," the new head of the government economic police said. In the past he has raised eyebrows with unorthodox views, like saying inflation does not really exist.

Venezuela's oil-dependent economy is again forecast to perform abysmally in 2016.

Jesús Farías, the man in charge of foreign investments, said he is eager and ready to receive businesses from all across the world.

However, the opposition is not as optimistic.

"While Nicolás is in that chair he is responsible," said former opposition candidate and governor of the state of Miranda, Henrique Capriles. "We don't want more nonsense, or the same old argument of an economic war."

Congress leader Henry Ramos said it is not possible to exit the economic crisis because the president insists on "clinging to a system that has not worked in the world."

Related: Venezuelans Wonder How the Opposition Will Handle Victory and the Government Defeat

With massive shopping lines in Venezuela and widespread shortages of basic goods such as milk and medicines, the government faces mounting pressure to change what critics call a failed model.

Venezuela depends on oil for about 96 percent of hard currency revenues. The average price for its oil and refined products fell this week to $24.38 dollars, the lowest in more than 12 years.

"The biggest loser in Latin America of the decline in oil prices is clearly Venezuela. At this point, a credit event in 2016 seems difficult to avoid," Barclays said in a research note.

It foresaw a government financing gap of nearly $30 billion dollars in 2016, for which it could receive $6.7 billion dollars in financing and would need to find $22.7.

Related: There Was a Lot of Yelling During the First Session of Venezuela's New Congress

Follow Victor Amaya on Twitter @victoramaya

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