Sanctions, currency collapse fan fear of hyperinflation surge in Venezuela

Miami Herald

2 days ago

Venezuela is spiraling once more into an inflationary storm as new data warns that price increases could skyrocket to 530% in 2025, fueled by a collapsing currency, oil export disruptions and mounting political and economic isolation.
After two years of relative calm and moderate economic stabilization, inflation has returned with a vengeance. According to Bank of America Global Research, monthly inflation hit 26% in May, up from 18% in April—marking the fastest pace in years and triggering fears of a return to full-blown hyperinflation.
'Fears of hyperinflation have returned,' said Sebastián Rondeau, an economist at Bank of America. 'The deterioration in price stability is severe and accelerating.'
The sharp surge in inflation follows a perfect storm of structural vulnerabilities and renewed external pressures, most notably the reimposition of U.S. sanctions on Venezuela's oil industry earlier this year and a concurrent fall in oil production.
Venezuela's annual inflation reached 229% in April, up dramatically from a year-over-year average of 94% in 2024. If current trends persist, Bank of America projects an inflation rate of 530% for 2025 — potentially Venezuela's worst economic year since the infamous hyperinflation cycle of 2017–2019.
Much of the inflationary pressure stems from Venezuela's crippled oil sector, one of the country's key lifelines for foreign currency and government revenue.
Bank of America and Bloomberg report that oil production fell to 870,000 barrels per day in April, down from 980,000 in March—a drop that analysts say is directly tied to the U.S. decision to let key operating licenses for American and international companies expire.
In late May, the Trump administration declined to renew the license that had allowed Chevron and several European firms to operate in Venezuela under sanctions waivers. As a result, Chevron was forced to halt the export of nearly five million barrels of oil, a significant loss for the cash-strapped socialist regime.
To make matters worse, other foreign oil operators such as ENI and Maurel & Prom also had their licenses suspended. These policy shifts have led to a sharp decline in oil shipments and a loss of crucial hard currency inflows.
Adding fuel to the fire, President Donald Trump announced in March that his administration would impose a 25% tariff on countries importing Venezuelan oil and a 15% tariff on direct imports from Venezuela.
The sanctions and oil export cuts have placed enormous pressure on the already weakened bolívar, which has been depreciating at an average of 13% per month this year. That rapid decline follows a brief period of currency stability in 2024, during which the Caracas regime tried to maintain a controlled exchange rate using Central Bank interventions and limited dollar reserves.
But those reserves have all but dried up. With declining oil exports, the government is struggling to get foreign currency and is once again resorting to monetary financing—printing bolívars to cover spending gaps.
As a result, prices for basic goods have soared. A kilogram of beef now sells for $7 to $8 on the black market, compared to $4 just a few months ago. Public workers are reporting real wage declines of over 70% since the start of the year, and strikes are spreading among healthcare workers, teachers and pensioners.
Failing to stop the economic firestorm, the socialist regime has turned its sights on those who dare to publicize the collapse. In recent weeks, authorities have detained economists, analysts and digital platform operators who publish independent financial data, intensifying a campaign of repression aimed at concealing Venezuela's worsening economic crisis.
The arrests followed the publication of alarming inflation data by the independent Venezuelan Finance Observatory, which reported an annualized inflation rate of 229% as of May. The Central Bank of Venezuela, controlled by Maduro loyalists, stopped releasing official inflation figures in October 2024, when prices began surging again.
'The government wants to eliminate the parallel market without supplying enough dollars — and that's impossible,' said exiled economist José Guerra, who heads the observatory. 'They're trying to control inflation while printing money without backing. Monetary liquidity increased 250% through May alone. That inevitably fuels more inflation.'
The government's sweeping effort to silence dissent has also extended to popular platforms like Monitor Dólar, which published unofficial exchange rates crucial for businesses and consumers in a country plagued by currency instability. The site stopped updating on May 27. Soon after, authorities detained around 20 people linked to the platform.
The cryptocurrency exchange El Dorado — often used as a benchmark for Monitor Dólar — also shut down operations in Venezuela following the arrests. Now, many informal currency exchanges are being routed through platforms like Binance in an effort to avoid digital surveillance and government crackdowns.
With the cost in bolivars of buying a U.S. dollar more than doubling since January, the regime has responded not with economic reform, but with political persecution.