World Bank evaluates anti-poverty plan in Venezuela before possible change of government

The World Bank evaluates a plan to combat poverty in Venezuela as part of a comprehensive program of economic recovery of the country in case of change of government, said Carlos Vegh, chief economist of the World Bank for Latin America and the Caribbean.

After the release of the agency's latest semi-annual report for the region, which signals an economic "implosion" in the former oil power, the executive offered an interview to the agency. AFP.

The report predicts a contraction in Venezuela's GDP of 25 percent for this year, with a cumulative 60 percent drop since 2013. What does the World Bank plan to do?

Reply: The Bank closed its offices in Caracas in 2009, but is closely following the situation in Venezuela, explore alternatives and formulate possible plans. A recovery plan for Venezuela would have three pillars: (1) fight inflation and stabilize macroeconomics, who would be in charge of the IMF, (2) increase oil production, which has halved since 2014, and (3) attend the social spacewhere the World Bank would participate with other organizations, such as the Fund, IDB (Inter-American Development Bank) and possibly CAF (Latin American Development Bank).

For the bank the priorities would be to fight against poverty, which we estimate at 90%, and to remedy the lack of food and medicine. These plans are not yet confirmed and should be applied when circumstances arise. When will it be? We do not know.

Q: How much money will it take to help Venezuela?

A: It's very difficult to estimate, but they are going to be tens of billions of dollars.

Q: This year, an annual inflation rate of 10,000,000% is expected. How long will it take to restore the economy?

A: I would like us to know. Helping to eliminate the budget deficit, and thus hyperinflation, will be as fast. The improvement in crude oil production will be a little slower as PDVSA (state oil company) suffers from a lack of maintenance and technical capabilities. The social will be perhaps the longest, because the humanitarian and social crisis is unprecedented in the modern history of the region.

Q: The report refers to "policies that create significant distortions" and "mismanagement in general".

A: Venezuela has adopted, starting with (Hugo) Chávez (between 1999 and 2013) and later by (Nicolás) Maduro, a development model that clearly did not work and that he was responsible for people who were not qualified to perform the basic duties of the state. Venezuela has the largest proven oil reserves in the world and PDVSA, which has always been a fundamental pillar, has collapsed. Venezuela is an example not to follow.

Q: Does the application of sanctions complicate the situation further?

A: I will not comment on this because it is a political problem.

Q: This week, the White House's chief economic advisor, Larry Kudlow, said that the US planned to inject dollars into Venezuela if President Nicolás Maduro left power. Are you thinking of dollarizing Venezuela?

R: I would not want to dollarize. 95% of hyperinflations were resolved by eliminating the budget deficit with financial badistance and establishing a fixed exchange rate of the dollar against the national currency for a specified period, who can then be relaxed.