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Improved economic conditions likely to mitigate food insecurity in the first quarter of 2024

  • Remote Monitoring Report
  • Venezuela
  • December 2023
Improved economic conditions likely to mitigate food insecurity in the first quarter of 2024

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  • Key Messages
  • Projected Outlook through May 2024
  • Key Messages
    • The moderate macroeconomic recovery and seasonal improvements to income—together with dollarization, the expansion of social protection programs, and stable food prices—will temporarily increase access to food for poor households. As a consequence, the number of households facing Crisis (IPC Phase 3) outcomes is expected to decrease until February. However, Stressed (IPC Phase 2) food insecurity outcomes will likely persist in the Capital District, Guárico, Barinas, and the states bordering Colombia (Apure, Zulia, and Táchira). Between March and May, poor households will likely have lower levels of social protection support to cover their caloric needs, limiting access to food for poor households outside of Caracas. However, macroeconomic conditions are expected to continue to be stable, which will slow down the transition of households from Stressed (IPC Phase 2) to Crisis (IPC Phase 3). 
    • Populations in need of emergency food aid are found across the country. These are primarily households that receive their income in local currency (VED) and do not have access to international remittances or to social protection program benefits in the form of Local Committees for Supply and Production (CLAP) food distributions or government vouchers. Usually dependent on the market for food, these households are more vulnerable to price fluctuations. Most are located in the peri-urban areas of the Capital District and the states bordering Colombia. There is also continued concern for some poor rural households. Although El Niño is not expected to affect the supply of food to markets, it will likely have a negative impact on purchasing power. Small-scale farmers, without access to irrigation systems, will have a second harvest of low-yielding maize, putting pressure on their livelihoods until the new harvest in March. Most of these rural households are located in Guárico, Apure, and eastern Barinas. 
    • Despite below-average rainfall conditions and above-average temperature resulting from El Niño, national production is expected to be above average. According to a USDA update, maize and rice production will increase compared to 2022/23 by 35 and 17 percent, respectively, and exceed the five-year average. Despite the poor weather conditions, commercial production increased due to expanded planting areas, the use of irrigation systems, and better access to fertilizers that helped improve yields compared to recent years, when the economy was worse. 
    • Tensions between the Venezuelan and Guyanese governments regarding the territorial dispute over the Essequibo region may lead to some trade restrictions between the two countries. However, such restrictions are not expected to have a significant impact on food availability or access for Venezuelans. Rice is the main food traded between the two countries, mainly for the CLAP program. However, Venezuela has improved its rice production—including the 2023/2024 harvest—and has more trading partners that can fill the import deficit, so the restrictions are not expected to impact the supply of staple grains. 
    AreaCurrent anomaliesProjected anomalies
    National
    • Consistent with the El Niño climate phenomenon, temperatures are above average and rainfall is below average, hindering crop growth during the second maize harvest and the main rice harvest of smallholder farmers in Guárico, Apure, and eastern Barinas. 
    • The monthly inflation rate continued to slow down in November, standing at 3.5 percent according to official figures from the Central Bank of Venezuela (Banco Central de Venezuela, BCV). This slowdown was achieved despite the financial expansion, due to exchange rate stability since November. 
    • The seasonal increase in food prices did not materialize as expected, due to successful local production and the unexpected stability of the VED. In November, prices in VED and USD remained stable for cereals, pasta, substitutes (such as cassava), and animal protein (except for chicken in local currency). However, prices remained higher than the previous year’s levels and the five-year average, except for cassava, which decreased 11 percent compared to 2022. The cost of the basic diet in VED and USD also remained stable.
    • Social protection system vouchers have been handed out since November. These have led to seasonal improvements in purchasing power, but the benefits distributed have not been substantially different than those of previous years. In Caracas, the monthly distribution of the CLAP handout continues, but there has been no CLAP distribution since October in the rest of the municipalities. The Christmas CLAP package was distributed but only included pork. A new CLAP package for children, containing Nutrichicha (a dietary supplement), was handed out in November. Public sector workers (almost 21 percent of workers in the country) received a new bonus of 100 USD to compensate for the losses due to a smaller CLAP handout than normal.
    • Ecoanalitica estimates that remittances in 2023 were 2.5 billion USD, 8 percent lower than in 2022. 
    • Above-average temperatures are expected to continue. Up to March, rainfall is expected to be below average. This may hinder the growth stage of staple grains and vegetable crops for small-scale farmers. Between March and May, there will be above-average rainfall conditions in the central, western, and Caribbean regions, which will positively impact vegetable harvest yields. However, the timing of the rainfall will likely be too late to benefit cereal production and—depending on the amount of rainfall—moisture could lead to outbreaks of disease. 
    • According to USDA estimates updated in December 2023, maize production will grow by 35 percent in the commercial year 2023/2024 compared to the previous year and be 92 percent above the five-year average, while rice production will increase by 17 percent compared to the previous year and be 66 percent above the five-year average. Production has grown due to the expansion of planting areas, improved access to fertilizers, and the use of more drought-resistant seeds. 
    • Imports will decrease slightly for rice and 30 percent for maize, compared to 2022/2023, as supply is increasingly based on expanded domestic production. Imports of wheat will increase by 30 percent and imports of bakery products, cereals, and pasta will rise by 3 percent compared to the previous year.
    • The increase in public spending in December is expected to be reflected in a rise in inflation from January onward. From January to May 2024, the inter-monthly inflation rate is expected to be between 4 and 7 percent below the values reported for the same period in 2023 due to foreign exchange intervention and the cap on the price of foreign currencies in banking. 
    • The International Monetary Fund expects the Venezuelan economy to grow by close to 4 percent in 2023 and 5 percent in 2024. The revival of oil and mineral exports such as gold during the period of sanctions relief could favor economic growth in 2024.
    • In the pre-election period, the Venezuelan government will continue to promote the annexation of Essequibo for campaign purposes in order to gain popular support. This is unlikely to lead to conflict or trade restrictions that will have an impact on food supply. 

    Projected Outlook through May 2024

    Domestic and imported food supply: Imports are the most important food source for Venezuela, but volumes are decreasing due to a gradual increase in local production. As of November, imports of agricultural products had decreased 18 percent between 2023 and 2022, according to the USDA. International purchases of white and yellow maize are expected to decrease, although to a lesser extent than for rice. However, in the case of rice, the increase in export prices in Brazil, Uruguay, and Paraguay due to unfavorable weather conditions could result in increases in the import price of this cereal to Venezuela. According to the USDA, between the 2018/19 and 2022/23 trading years, rice imports accounted for 64 percent of the total supply. Although international rice purchases have fallen over the past five years, imports remain a critical source of cereal supply. In 2022, rice was the third most-consumed cereal, with 26 kg per capita (23 percent of cereals consumed), after wheat and maize, according to the USDA. Imports of wheat, bakery products, cereals, and pasta will increase in 2023/24. Informal imports will contribute to household supply.

    Despite the weather conditions (Figure 1), local maize and rice production are expected to improve in 2023/24 by 30 and 14 percent, respectively, compared to the previous trading year. This is due to the use of irrigation systems for crops, along with increased production capacity due to expanded planting areas, access to fertilizers, and the use of more drought-resistant seeds. Expanding domestic production will help supply local markets in both urban and rural areas. In addition, the output of the national rice harvest in November mitigated the impact of increased import prices. 

    Cash crop production will remain normal or even slightly above average, despite the continued dry conditions expected until February. However, small-scale farmers who grow crops without irrigation systems will continue to suffer impacts in the growth stage, especially for maize production in the states of Guárico, Apure, and eastern Barinas (Figure 2). 

    With the increase in rainfall from March to May, the main cash crop areas and small-scale farming areas in the Andean region and the east will achieve normal harvests. The rainfall will mainly favor the cultivation of vegetables that grow between March and May, especially for small-scale farmers. Meanwhile, as rainfall is expected to be above average and soil moisture is currently low, there is a potential for the rainfall to cause surface run-off, as well as poor absorption. Moisture could lead to disease outbreaks, which would have a slight negative impact on crops ready for harvest by small-scale farmers who do not have access to technology to prevent them. 

    Figure 1

    Cumulative rainfall from October to December 2023 as a percentage of the average (1981–2010)
    Mapa de Venezuela que muestra precipitaciones por debajo de la media de octubre a diciembre

    Source: FEWS NET

    Figure 2

    Normalized Difference Vegetation Index in December 2023 as a percentage of the average (2012–2021)
    Mapa de Venezuela que muestra las condiciones de los cultivos por debajo de la media en diciembre

    Source: FEWS NET

    Macroeconomic context and food prices: In November, the monthly inflation rate contracted (6 to 3.5 percent from October to November) despite monetary expansion, according to the BCV. Year-on-year variation fell to 283 percent in November 2023 (from 317 percent in October), reaching the lowest year-on-year variation of 2023. The spending categories that contributed to the largest variations in inflation were household equipment (5 percent), clothing and footwear (5 percent), and health (4 percent). The slowdown in inflation rates was mainly due to the stability of the VED in November compared to the previous month, with a variation of less than 1 percent. According to Síntesis Financiera, the value of the VED remained stable despite the increased money supply due to continued exchange rate stability (Figure 3), as well as the payment of taxes in local currency and the adequate availability of foreign currency in the exchange market—both due to BCV's intervention and Chevron's participation. However, depreciation of the VED against the USD is expected to resume. According to Síntesis Financiera, in April 2024 the value of the USD will likely double compared to April 2023 (26 VED/USD to 53 VED/USD) because of the acceleration in public spending during the electoral campaign season. Given with the predicted depreciation of the VED, the inter-monthly inflation rate is expected to stand between 4 and 7 percent from January to May 2024, depending on the scale of pre-election public spending.

    Figure 3

    Headline and food monthly inflation rate, January 2022 to November 2023
    Gráfico que muestra la estrecha relación entre la evolución de la inflación general y de los alimentos y la evolución de los tipos de cambio en 2022 y 2023

    Source: Central Bank of Venezuela and Síntesis Financiera

    Public spending, which is largely funded by oil revenues, slowed by 18 percent in November from the 42 percent expansion reported in October. This accounted for the delay in social protection benefits, which did not materialize until December. International oil prices weakened again in November, and the monthly average of a barrel of crude oil (Brent) dropped below 90 USD due to OPEC's decision to postpone its meeting to discuss possible cuts and production targets among member countries. Venezuela produces about 800,000 barrels of oil a day, well below the historical average of three million barrels (pre-crisis). Production capacity could increase by 300,000 barrels per day in 2024 due to international investment and the temporary lifting of sanctions on crude oil exports. The price and current low production level of oil have decreased public revenues, although revenues may increase during the remainder of the sanctions relief period, which would help offset the increase in public spending expected in December. 

    Access to food for the poorest market-dependent households will likely continue to be limited, although perhaps to a lesser extent, due to a moderate rise in food prices. In the monthly comparison (October to November), prices in VED and USD of pasta, cereals, and substitutes (such as cassava) remained stable, with the exception of butternut squash, which increased 5 percent in USD. The price of animal protein (eggs, chicken, tuna, sardines) increased by up to 8 percent. Although November food prices (USD and VED) remained above 2022 levels, there was no significant seasonal increase in VED, thanks to the stabilization of the local currency. This will improve the purchasing power of peri-urban households whose income is in VED.

    Sources of income and social protection programs: Most of the poorest households that receive income in VED have experienced a seasonal improvement in their income due to social protection programs. Although the types of programs delivered have varied with respect to previous years, they have improved the purchasing power of most poor households. Social protection programs are expected to decline seasonally after January but will increase again around the elections, although it is unclear when these will take place.

    In November and December, public sector workers—whose salaries are in VED—benefited from a new co-responsibility and training bonus, which added 100 USD to their income. This income will help cover the cost of the minimum caloric needs for each person in an average household. These two months of improved purchasing power predominantly benefited poor households in peri-urban households, mainly in the Capital District, where the majority of public sector workers are. In addition, following a presidential decree to adjust the value of the Cesta Ticket food benefit in accord with the monthly exchange rate published by the BCV, the Cesta Ticket increased to 1,407 VED in November (from 1,389 in October and 1,000 in May). As a result, the poor in peri-urban areas who have formal employment and are paid in VED are likely to have benefited the most from the various social programs this season. 

    Meanwhile, CLAP handouts covered approximately 20 to 25 percent of caloric requirements for the poorest households, regardless of whether they have formal (public or private) or informal employment. Normally, the frequency and calorie count of the CLAP handout increases at Christmas, but this seasonal improvement was delayed in 2023. In Caracas, the monthly CLAP distribution continues. However, the rest of the country has not reported distribution since October, when there are normally monthly handouts starting in November. The Christmas CLAP package was distributed in December but included only pork, and not the ingredients for hallacas. The full coverage is unknown, but apparently priority was given to people working in the public sector. Although the selection of CLAP beneficiaries is slightly different from that of the new cash bonus, it largely reached poor households similar to those who would have benefited from the seasonal CLAP handout. Outside urban Caracas, public sector workers are one of the largest groups paid in VED, so they are a population of concern. Consequently, the change in seasonal CLAP distributions is unlikely to affect current or forecasted food security scenarios. In addition, a new CLAP handout for children has been distributed in Caracas since November containing the preparation for the Nutrichicha dietary supplement, which is likely to prevent consumption gaps for schoolchildren who are on holiday and are not benefiting from school meal programs. It is therefore likely that the poor in peri-urban areas with informal employment, who continue to benefit from CLAP distributions, also experienced an improvement in their food intake. 

    The income of some informal agricultural workers is expected to improve seasonally over the projection period. The coffee harvest accounts for the livelihood of approximately 150,000 rural people during the three months of harvest (October to December). These are families from places near farms located mainly in Lara, Portuguesa, and Trujillo, which produce about 65 percent of Venezuela's coffee. Over the rest of the year, the coffee industry employs 75,000 people for maintenance work. Employment is expected to be average, although the industry has reduced its yields since 2014. Demand for seasonal agricultural labor is also likely to increase slightly, given the better commercial yields in 2023/2024, with peaks for rice and maize harvests (March to May).

    According to Ecoanalitica, remittances in 2023 are estimated to have reached 2.5 billion USD, 8 percent below the 2.7 billion in 2022. Venezuelan migrants have gone to various countries in the region, including many to Colombia. High inflation since the pandemic in countries hosting the Venezuelan diaspora has limited the amount and value of remittances shared. The flow of remittances will continue to decrease but at a more moderate pace while regional economies, including Colombia’s, continue to strengthen. 

    Projected food security outcomes: Better-than-anticipated improvements in the macroeconomy and the price of the basic diet since April have improved the food security outlook at least until February. While the coverage and seasonal quality of the CLAP handout has decreased, the new bonuses for public workers, improved economic indicators due to the lifting of sanctions, and production from the maize, sorghum, vegetable, and rice harvest will guarantee food availability with widespread access. As a result, most poor households are expected to remain in Stressed (IPC Phase 2) food insecurity from December to February, resulting in Stressed (IPC Phase 2) outcomes in the Capital District, Guárico, Barinas, and the states bordering Colombia (Apure, Zulia, and Táchira). 

    From February onward, incomes are expected to be seasonally lower due to the reduction in social protection programs, as well as the pre-harvest period when households will again experience food consumption deficits and be forced to adopt coping strategies such as selling their assets, reducing education and health expenditures, and reducing the number and quality of meals. However, given the current slowdown in depreciation of the local currency, inflation and stable food prices will help improve purchasing power and reduce consumption and livelihood protection deficits up to April, which will help slow the transition of households from Stressed (IPC Phase 2) to Crisis (IPC Phase 3), which was expected to start in February. Depending on when the pre-election season starts, social programs will once again provide supplementary income to poor households.

    Despite recent improvements in economic conditions, there are still two main areas of concern throughout the outlook period. The first are poor households located in peri-urban areas, who do not receive monthly CLAP handouts and who are structurally excluded from several social protection programs. Due to relatively low purchasing power exacerbated by structural poverty, these households will likely resort to coping strategies to meet their seasonally higher expenses from December to February and will remain in Crisis (IPC Phase 3). These households are located mainly in the peri-urban areas of the Capital District and the border states with Colombia. The second group of concern is rural smallholder households without access to irrigation systems due to structural poverty. These households are located primarily in Guárico, Apure, and eastern Barinas. Although precipitation will improve from March 2024, this is expected to benefit only their vegetable crops, as the planting and growing season for grains will have already concluded. Therefore, these households’ second grain harvest will be negatively impacted by rainfall and temperature anomalies, compounding the losses of the first maize harvest season in August to October 2023. As a result, these households will face reduced sources of livelihoods and incomes, which will further decrease their purchasing power in the markets. In addition, they will likely increase their use of coping strategies to meet their basic food needs, facing Crisis (IPC Phase 3) outcomes for the entire projection period, but with a peak in needs in March. 

    Events that May Change the Scenario

    Table 1
    Possible events over the next five months that may change the most-likely scenario
    AreaEventsImpact on food security outcomes
    NationalExtension of sanctions relief beyond April 2024If the Venezuelan government continues to comply with the electoral conditions and the US government extends the lifting of the sanctions, this will benefit the oil, gold, and gas industries for more than six months. This will provide the Venezuelan government with new resources for the electoral campaign and the expansion of social protection programs. This would improve poor households’ access to income and food, according to current projections. There would be further declines in the population facing Crisis (IPC Phase 3) outcomes, but the Stressed (IPC Phase 2) population would probably not decrease in this period, as the structural food and labor market conditions that cause these households’ vulnerability take longer to change.
    NationalHigher oil industry production during a period of high oil pricesIf the oil industry continues to attract international investment and increase production capacity, this would help improve exports and increase the gross domestic product (GDP). This would boost the economy, expanding the formal and informal employment available and the corresponding purchasing power for some poor households. This would further decrease the population facing Crisis (IPC Phase 3) outcomes.
    NationalIntensification of the conflict with GuyanaIf Venezuela invades the Essequibo region to grant operating licenses for the mining resources in the territory currently controlled by Guyana, the regional and global stance against Venezuela could escalate. This could lead to withdrawal of the temporary sanctions relief, impacting the gold, gas, and oil trade and thereby reducing the government's investment capacity in social protection programs. This would likely result in an increase in market prices, as well as a reduction in public spending on income-boosting social programs, which would reduce household purchasing power and push a greater share of population into Crisis (IPC Phase 3) outcomes.

    Recommended citation: FEWS NET. Venezuela Remote Monitoring Report December 2023: Improved economic conditions likely to mitigate food insecurity in the first quarter of 2024, 2023.

    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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