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Despite macroeconomic improvements, Stressed (IPC Phase 2) outcomes will continue in 2024

  • Remote Monitoring Report
  • Venezuela
  • February 2024
Despite macroeconomic improvements, Stressed (IPC Phase 2) outcomes will continue in 2024

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  • Key Messages
  • Projected Outlook through September 2024
  • Events that might change the outlook
  • Key Messages
    • Stressed (IPC Phase 2) outcomes will persist as the highest classification at the area level in Venezuela1 until September. However, millions of households are experiencing Crisis (IPC Phase 3) outcomes due to a number of factors. The El Niño phenomenon is affecting the weather, and, likewise, several economic factors related to agricultural production, while reduced labor supply and high food costs are limiting the purchasing power of the poorest households. This is reducing access to food and forcing families to resort to unsustainable coping strategies to meet their basic needs.  
    • Small-scale farmers and indigenous people in El Niño-affected areas will be in Crisis (IPC Phase 3). Rainfall deficits, especially in Zulia, Falcón, Anzoátegui, Guárico, Apure, Amazonas, and Delta Amacuro, will cause damage to the development of crops in agricultural production. This will likely reduce the amount of food available to subsistence farmers, forcing them to resort to coping strategies to meet their food needs. The situation is expected to improve from June, when the normalization of rainfall favors food production, availability, and access. A sizable segment of these households will transition from Crisis (IPC Phase 3) to Stressed (IPC Phase 2) between June and September. 
    • The poorest households in peri-urban areas of the Capital District, Guárico, Barinas, Apure, and Zulia are in Crisis (IPC Phase 3) throughout the analysis period. The economic crisis has reduced employment, increased inflation, and decreased the purchasing power of the population. Household incomes are not enough to afford a basic diet, which is particularly affecting people who rely on income in the local currency (VED). In addition, these households neither have stable incomes, nor are regular beneficiaries of social protection programs. The economic situation is expected to worsen between May and September, which will increase the population in Crisis (IPC Phase 3). The non-renewal of General License 44 (LG 44) will negatively impact the availability of imported food, especially cereals and medicines. While License 42 has helped stabilize the exchange rate and inflation since last October, its long-term sustainability is uncertain. In addition, the electoral context could generate an increase in social protection programs, although their impact will depend on the country's political and economic situation.

    Figure 1

    Profiles of households expected to experience Crisis (IPC Phase 3) outcomes in the forecast period*
    VED and small scale farmers

    *Given the diverse demographic and geographic characteristics of these households, these populations live in most areas across the country. However, there are not enough households experiencing these conditions to classify one particular state or the Capital District as Crisis (IPC Phase 3) level.

    Source: FEWS NET

    ZoneCurrent AnomaliesProjected Anomalies
    National
    • In January and February, most of the country experienced a rainfall deficit and above-normal temperatures that caused wildfires and water stress in crops. The greatest impacts were in Apure and Zulia states and in parts of the states of Portuguesa, Barinas, and Guárico. The fires have mostly affected forest reserves, natural parks, and some savannas. The wildfire risk continues until March, when the rains begin. 
    • In January, the annual inflation rate of the VED was 107.3 percent, with a slowdown in monthly inflation to 1.7 percent— its lowest level since March 2022. Interventions of the Central Bank of Venezuela (BCV) remained stable, while an increase in government revenues resulted in greater fiscal capacity to manage public spending. Despite this transitory stability, inflationary pressures continue to eat away at the purchasing power of most Venezuelans. 
    • Monthly food and non-alcoholic beverage inflation increased 1.25 percent in January 2024 compared to December 2023, slightly less than the headline inflation rate of 1.7 percent in the same month. The price of the basic and diversified diet has remained stable in VED and USD, with monthly variations of less than 5 percent since September 2023.  
    • In addition to a decrease in maize and rice production (due for harvest between March and May) because of the El Niño phenomenon, a gradual increase in rainfall is expected from April. Below-normal values will likely be observed only in some parts of the central and northern areas of the country (Figure 2), generating mostly favorable conditions for a good harvest between August and November, especially for the main maize crop and the secondary rice crop. 
    • Annualized inflation is expected to be less than 150 percent (compared to 189.8 percent in 2023). However, according to Síntesis Financiera, the suspension of the General License 44 (LG 44) at the end of April 2024 will force the annual inflation rate upwards to around 162 percent.
    • Domestic cereal prices are expected to increase compared to 2023 levels, both in VED and USD, until May of this year, due to the high costs of inputs, many of them imported, and the lower seasonal availability of domestically produced grains. In addition, with the expiration of LG 44, which may raise the prices of cereals imported from the United States, a reduction in the purchasing power of households is expected starting in May. However, between August and September, the better availability of local crops such as maize, rice, and beans could help mitigate the increase in prices of these foods.

    Projected Outlook through September 2024

    Domestic and imported food supply: Along the coast in the states of Falcón, Carabobo, Aragua, Portuguesa, Barinas, Mérida, and Táchira, areas susceptible to erosion and experiencing possible water stress in crops have been observed (Figure 2). The rest of the country is experiencing moderately healthy vegetation conditions. A decrease in maize, sorghum, and rice production is forecast between March and May due to the El Niño phenomenon, which will affect production levels and crop yields. Subsistence farmers in particular will see a reduction in available food and income in this period.

    Figure 2

    Percentage of the average (2012-2021) of the Normalized Difference Vegetation Index (NDVI), February 16-25, 2024
    A lo largo de la costa en los estados de Falcón, Carabobo, Aragua, Portuguesa, Barinas, Mérida y Táchira, se observan áreas susceptibles a erosión y con posible estrés hídrico de los cultivos.

    Source: USGS/FEWS NET

    From April, a gradual increase in rainfall with normal or above-normal values is expected in most of the country (Figure 3). As a result, a good harvest is expected between August and November, especially for the main maize harvest and the secondary rice harvest. For vegetables in general, the expected weather conditions will be favorable for agricultural production in the Central (cereals), Oriental (vegetables and fruits), and Los Andes (potato) regions.

    Figure 3

    Predicted probability of above-average rainfall (green shading) in April-June 2024
    Probabilidad prevista de que la lluvia sean superiores a la media (tonos verdes) durante el periodo abril - junio de 2024.

    Source: NOAA

    According to the USDA, Venezuela increased its maize production (37 percent, reaching 1.3 million tons (MMT) and rice (13 percent more planted area) for the 2023-2024 season, thanks to better access to higher quality agricultural inputs and seeds and favorable weather conditions. In addition, food supply has improved because the United States continues to be the main exporter of maize and the third largest exporter of wheat, while a competitive price could also favor rice exports. As for wheat, Venezuelan imports are estimated to be 1.35 MMT. Locally produced wheat flour accounts for 60 percent of domestic availability, while Turkey remains the leading supplier of finished wheat products. However, the lack of agricultural funding is still a constraint for significant investment in the farming industry. 

    Markets will continue to be well-supplied thanks to a possible increase in local production and imports. There are expectations of improvement in cereal production from April, but insufficient to not rely on imports. Therefore, food availability is growing, but access to and consumption of maize, rice, and wheat will continue to be restricted by low purchasing power. The expected non-renewal of the LG 44 will further complicate food consumption. 

    Macroeconomic context: The exchange rate remained stable in the first month of the yearthanks to a constant supply of dollars and the timely intervention of the BCV. While Venezuela continues to rank as one of the countries with the highest levels of inflation in the world, annual and monthly inflation rates have moderated since the end of 2023 to date. Inflation is estimated to continue below 150 percent through the end of April. Despite the moderation in the inflation rate and a more stable exchange rate, the purchasing power of households continues to be restricted. 

    The temporary lifting of international sanctions for the Venezuelan oil industry for six months (from October 2023) facilitated economic recovery and led to an expectation of GDP growth of between 9 and 10 percent in 2024. However, from May to September, the performance of the economy is likely to face a more complex landscape with the end of LG 44. In principle, oil revenue will likely be lower than projected, as it is estimated that Petróleos de Venezuela, S.A (PDVSA) will cease to receive 2.8 billion USD in 2024. This loss of revenue is likely to be accentuated in the following years. Lower expectations will likely imply a reduction in projected GDP growth to 3.8 percent. Likewise, annual inflation could reach 162 percent and the exchange rate will likely show greater volatility with a projected deterioration of 78 percent in 2024, according to Síntesis Financiera. In this scenario, it will likely be difficult to maintain economic development policies, while the funding of social protection programs in their current version will likely become more complicated due to the decrease in oil revenue.

    Food prices: In January, there was some relief from inflationary pressure, but the population continues to have limited purchasing power and relies heavily on support from social protection programs. Prices of essential foods continue to rise, especially rice, but the increases are less pronounced in the case of maize flour and pasta. The increase in agricultural production may contain the rise in prices of products such as cereals and oils. However, prices for animal products remain high, given the dependence on imported inputs such as maize and soybean flour.

    Between February and May, prices of basic foods in VED such as maize flour, pasta, and rice are expected to increase compared to the same period in 2023 due to the effects of the El Niño phenomenon. However, the facilitation of food imports with oil revenue and the results from increases in cereal production areas are mitigating this upward trend. 

    Prices will remain high between June and September, but less so than in the first projection period due to a projected increase in rice-growing areas (13 percent in 2024) and domestic maize production, which is estimated to be above average, thus improving domestic commercial production. However, as the provisions of LG 44 end, the import of inputs, such as seeds, agrochemicals and cereals quoted in USD, will be restricted. This, in turn, will affect the prices of animal feed and other food for human consumption. In this context, limited purchasing power will likely mean that access to food remains difficult throughout the outlook period and will likely worsen starting in June, especially for poor households. 

    Therefore, international food prices in USD may show greater stability or slight decreases in the second half of the year, while prices in VED will likely increase more intensely given the risk of greater volatility of VED with respect to USD due to political uncertainty and the possible reduction in oil revenue. The effects of these trends, especially for the purchase of food, will likely also affect the majority of Venezuelan households, which receive salaries or social assistance in VED. 

    Income sources and social protection programs: The minimum wage has remained unchanged, limiting the purchasing power of the population. The minimum wage in VED, equivalent to less than 4 USD at the official exchange rate, is not enough to cover the basic food needs of a household, despite supplements such as the Carnet de la Patria. It should be noted that salaries in the Venezuelan private sector increased by 45 percent in the third quarter of 2023, reaching an average of 185 USD per month for unskilled laborers. This means that the purchasing power of the population has not necessarily recovered at the same rate as nominal wages due to inflation. However, in some sectors such as the private and informal sectors, the population receives most of its income in USD, which alleviates these deficits. Remittances will likely continue to be a vital source of income, but not to the same extent, as their continuity will depend on factors such as economic growth in sending countries and regulations on sending money to Venezuela.

    To mitigate the impact of high prices on the purchasing power of the population, the government provides programs such as the CLAP, Cesta Ticket, and money transfers through the Carnet de la Patria. In addition, there was still the Corresponsabilidad y Formación Bonus of 100 USD for public sector workers in January and February 2024, which has managed to improve access to food for some sectors of the population, but has not yet managed to bridge the food gaps for all Venezuelans. However, the long-term sustainability of these programs is uncertain, as they depend heavily on the availability of government resources. The government is expected to continue implementing the benefits of the Patria system to stabilize the economic crisis and win the approval of the population during the pre-election period (through September).

    Projected food security outcomes: Food availability is assured for the entire analysis period, due to the combination of imports and domestic production. However, as of May 2024, the non-renewal of LG 44 could have an additional impact on food availability, as it currently allows for the import of agricultural products with reduced tariffs, which has helped maintain more accessible prices for consumers. The constraints facing the poorest households will continue to be around food access due to high prices both in the local currency and in USD, despite the slowdown in the inflation rate. Without LG 44, the prices of some agricultural products may increase, which will likely exacerbate food insecurity for households with fewer resources — especially those earning in VED and those with less access to social protection programs or remittances. 

    Small-scale farmers in areas affected by the El Niño phenomenon, including subsistence farmers in the indigenous population, are in Crisis (IPC Phase 3), without reaching the 20 percent of the population necessary for area-level classification. Rainfall deficits in the states of Zulia, Falcón, Anzoátegui, Guárico, Apure, Amazonas, and Delta Amacuro are the main cause of this outcome. These deficits have resulted in damages during crop development and to agricultural production in general, which may reduce the amount of food available as household reserves, as these farmers rely on their crops to feed their families. These households will likely implement consumption-based coping strategies such as portion size reduction, and livelihood coping strategies such as selling assets or taking out loans. The situation is expected to improve for these households from June, when rainfall normalizes and favors food production, availability, and access. During this period, the affected populations will transition from Crisis (IPC Phase 3) to Stressed (IPC Phase 2), as the seasonal weather forecast indicates an improvement in conditions. This will benefit the local agricultural production of cereals, legumes, fruits, and vegetables for the next season due for harvest between August and November. This will likely improve the income level, purchasing power, and access to food for these households, as well as allowing them to diversify their diet.

    The poorest populations in the peri-urban areas of the Capital District, Guárico, Barinas, Apure, and Zulia are in Crisis (IPC Phase 3). Their unstable income in VED, combined with limited access to social protection, a lack of job opportunities, precarious informal employment, and high food prices have impaired their purchasing power and forced them to adopt coping strategies to cover their basic needs. For these households, who do not have their own means of production and are dependent on the market for food, the situation is expected to worsen between May and September, with an increase in the Crisis (IPC Phase 3) population due to the impacts of the non-renewal of LG 44 on the availability of imported food, especially cereals and medicines. Even though the electoral context could generate an increase in social protection programs, their impact will depend on the country's political and economic situation. In addition, the coverage and amounts of social protection programs will depend on the uncertainty around government revenue due to international sanctions and the behavior of oil production.


    Events that might change the outlook
    Table 1
    Possible events in the next eight months that may change the most likely scenario
    ZoneEventImpact on food security outcomes
    NationalNegotiation of an extension of LG 44 between the United States and Venezuela

    The Venezuelan government's revenue could improve, leading to an expansion of social programs, which would sustain the consumption of food by lower-income households and decrease the population in Crisis (IPC Phase 3). This would likely safeguard current conditions both in access to basic products and basic services (healthcare), and prevent some economic decline projected in this analysis. This would also ensure the availability of essential products such as wheat, maize, rice, and milk, as well as economic stability due to market and price stabilization, with a lower rate of inflation in the food industry.

    In addition, it would strengthen macroeconomic stability, fostering sustained growth, generating positive impacts such as an increase in GDP growth of 7.4 percent instead of 3.8 percent, an increase in private consumption to 6.2 percent instead of 4.5 percent, a reduction in inflation to 90 percent instead of 162 percent, and an exchange rate stabilization reaching a level of 56 VED/USD versus 78 VED/USD.

    Recommended citation: FEWS NET. Venezuela Remote Monitoring Report February 2024: Despite macroeconomic improvements, Stressed (IPC Phase 2) outcomes will continue in 2024, 2024.

    1

    In Venezuela, FEWS NET's area-level unit of analysis consists of the country's 23 states and the Capital District.

    In remote monitoring, a coordinator typically works from a nearby regional office. Relying on partners for data, the coordinator uses scenario development to conduct analysis and produce monthly reports. As less data may be available, remote monitoring reports may have less detail than those from countries with FEWS NET offices. Learn more about our work here.

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