When the International Monetary Fund (IMF) recently estimated that Venezuela’s inflation will reach 1 million percent this year, many analysts jumped to the conclusion that President Nicolás Maduro’s days in power are numbered.
But the experience of Zimbabwe, which went through a similar hyperinflation in 2008, shows that the Venezuelan dictator may remain in power for several years by dollarizing the economy, and incorporating some opposition leaders into his regime.
I see three scenarios for Venezuela in light of the latest forecast by the IMF. In addition to estimating a 1 million percent hyperinflation this year — which it compared with that of Germany in 1923 and that of Zimbabwe in 2008 — the IMF calculates that Venezuela’s economy will contract by a whopping 18 percent this year, for a record 50 percent decline over the past five years.
