In May 2026, four months after the Washington-choreographed removal of Venezuelan President Nicholas Maduro, the International Monetary Fund (IMF) and the World Bank, resumed their formal relations with the Latin American nation, in a sharp reversal from the 2019 episode, when the two global monetary bodies suspended dealings with Caracas due to a major dispute over the nation’s ‘legitimate leadership’, and the government’s refusal to provide mandatory, transparent economic data.
Interim President Delcy Rodriguez has asked IMF Managing Director Kristalina Georgieva for access to $5 billion in special drawing rights (SDRs) that Venezuela holds. This would be used for infrastructure, electricity, and water improvements.
The new administration has also opened the energy sector to foreign investment. Shell will develop the Loran field, which had been abandoned for 23 years, and comprises seven natural gas deposits, with six of them straddling the maritime border with Trinidad and Tobago. As per Rodriguez, the project would allow Venezuela ‘to take a very important step forward in its gas development, and also as a gas exporter’.
After taking over Venezuela’s reigns post the US-staged arrest of controversial president Nicholas Maduro, the Rodriguez government has identified the Latin American country’s huge energy reserves as one of the routes to help the nation escape its economic abyss. Agreements have been signed with several of the world’s leading oil companies, including Britain’s BP and Spain’s Repsol.
Chavismo: A period of mixed opportunities
The 1999–2013 phase under Hugo Chavez was all about a massive, oil-fuelled expansion of social spending and poverty reduction, coupled with the erosion of long-term economic stability through nationalisations, rigid price controls, and extreme dependence on petroleum exports.
Under Chavez, Venezuela benefited from a historic surge in global oil prices, which skyrocketed from roughly $11 per barrel in 1998 to over $100 by the late 2000s. The influx of petrodollars allowed the administration to double domestic social spending. It heavily subsidising food, healthcare, and education, which significantly reduced poverty and income inequality during his presidency.
The Chavez administration nationalised major industries. In 2003, it brought forward stringent currency and exchange controls to prevent capital flight from the Latin American nation, alongside strict price controls on basic goods.
However, it missed a trick, by not using its oil wealth to diversify the domestic economy. By the end of Chavez’s term, petroleum accounted for 95% of Venezuela’s export revenues, and about half of all government income.
The move of purging state-run enterprises of experienced workers, and replacing them with political loyalists was another blunder, as the move hindered productivity. By the time of Chavez’s death in 2013, the foundation of the economy was critically damaged by rampant inflation, chronic shortages of basic goods, and an overvalued currency.
Chavez must be credited for sharing Venezuela’s vast oil wealth with the poor and disenfranchised. Chavismo (the term that defined the Chavez-led left-wing populist movement in Venezuela) witnessed the percentage of Venezuelans living below the poverty line falling to 36.3% in 2006 from 50.4% in 1998.
Infant mortality fell from 20.3 per thousand births when Chavez came to power, to 12.9 by 2011. The access to education was another massive plus for the country, with the number of children enrolled in secondary education rising from 48% in 1999 to 72% in 2010.
However, ‘Chavismo’ came at a cost, as the Latin American country had to reduce state-run oil company PDVSA to the status of a ‘piggy bank’, in order to sponsor the government’s social security projects, while neglecting oil infrastructure and production.
Maduro rule: The abyss kicks in
However, the real downfall happened in March 2013, as Nicholas Maduro took over the administration’s reigns immediately after Chavez’s death.
The domestic economy shrank 71% between 2012 and 2020, while inflation topped 130,000%. Its oil production, the beating heart of the country, dropped to the unthinkable less than 400,000 barrels a day.
Between 2013 and 2025, as per the World Bank and the IMF, approximately 80% of the country’s GDP evaporated, a figure that dwarfs what happened to the United States in the Great Depression (29%), and to the Soviet Union during its collapse.
Along with the structural fragility, Venezuela missed the opportunity to utilise sovereign wealth funds to sterilise the liquidity generating from its trade. Even though the Latin American nation had an entity called Macroeconomic Stabilization Fund (FEM), by 2014, the fund held less than $3 million.
As crude prices collapsed, Venezuela faced a choice between fiscal austerity or monetary expansion. As per Iranian freelance journalist Amirreza Etasi, a keen observer of Maduro’s economic missteps, the administration attempted to plug a fiscal gap, approaching 15% of GDP, not by cutting spending, but by expanding the monetary base.
As inflation ticked upward, the government attacked the symptom (prices) rather than the cause (liquidity). The 2014 ‘Fair Prices Act’ capped profit margins, and mandated sales below replacement cost.
“The economic result was a textbook negative supply shock. Manufacturers, unable to cover marginal costs, halted production lines. The scarcity index for basic goods skyrocketed to over 80%. To manage the fallout, the government militarised food distribution (CLAP), shifting from a market economy to a clientelist rationing system prone to massive corruption,” Etasi said.
Simultaneously, the Central Bank of Venezuela (BCV) was stripped of its autonomy, with Maduro government turning the entity as a printing press for the Ministry of Finance. This triggered hyperinflation (technically defined as monthly inflation exceeding 50%) in November 2016. By 2018, annual inflation hit an astronomical 130,060%, though IMF estimates were higher.
To mask the collapse of the currency’s value, Venezuela engaged in serial redenomination. In 2008, three zeros got removed. In 2018 and 2021, the number stood at five and six, respectively. In total, 14 zeros were removed from the currency in 13 years.
Post the 2002–03 PDVSA strikes, the executive branch of the oil company fired over 18,000 technocrats (geologists, reservoir engineers, and managers) stripping the company of its institutional memory. They were replaced by political loyalists.
“In the capital-intensive oil industry, failure to invest in depreciation and amortization (D&A) is fatal. PDVSA stopped injecting water and gas into aging wells to maintain pressure. Result: production freefall from three million barrels per day (bpd) to a nadir of under 700,000 bpd by 2020. The collapse was sealed by the physical failure of the power grid. The March 2019 nationwide blackout, caused by brush fires and neglected transmission lines at the Guri dam, paralysed the country for days. Without electricity to power the upgraders in the Orinoco Belt, the heavy crude turned into sludge in the pipes, causing permanent damage to the infrastructure. This event alone cost the economy an estimated $2.9 billion in GDP,” Etasi remarked.
By 2019, price controls were abandoned, and the US dollar was allowed to circulate freely (de facto dollarisation). While the move stopped the hyperinflationary bleeding, it bifurcated the nation into two distinct economies.
The dollar economy (20%) was a segment fuelled by remittances, illicit gold exports to Turkey/UAE, and government contracting. On the other hand, emerged the bolivar economy (80%): Public sector workers and pensioners earning in local currency, whose purchasing power was obliterated.
By late 2025, oil production crawled back toward 900,000 bpd, aided by specific licences for United States’ Chevron and swap deals with India’s Reliance Industries involving naphtha for crude. However, with a credit-starved banking sector (due to 73% reserve requirements) and decimated public utilities, sustainable growth remained mathematically impossible.
The Gini coefficient, on the other hand, rose from 40.7 in 2014 to 53.9 in 2024, making Venezuela the most unequal country in the Americas. In 2025, Venezuelan inflation soared to 475% in 2025, the highest in the world.
On 2019, Washington imposed full blocking sanctions on the government of Venezuela, freezing all its assets in the United States, and cutting off state-owned oil company PDVSA from the American financial system.
Facing the heat, Maduro did implement a series of economic measures in 2021 that eventually ended Venezuela’s hyperinflation cycle. He paired the economic changes with concessions to the US-backed political opposition, including negotiations for what many had hoped would be a free and democratic presidential election in 2024.
However, in April 2024, the then Joe Biden government allowed the primary oil and gas waivers to expire, citing a failure by the Maduro government to uphold the democratic commitments made in the 2023 Barbados Agreement.
Delcy Rodriguez: Administrator facing a daunting task
Delcy Eloina Rodriguez Gomez, daughter of the Venezuelan guerilla leader and politician Jorge Antonio Rodriguez, wears multiple hats: lawyer, diplomat, and politician. The third is the one she is wearing now. Her promotion from vice-president to President came in January 2026, immediately after Maduro’s arrest.
She has inherited an economically fragile country that needs more than miracle to become ‘great’ again (going by Trump’s immediate reaction on her appointment). The American sanctions on the Venezuelan Central Bank (BCV) have been lifted, and Luis Perez-Gonzalez, deputy of former BCV President Laura Guerra, has been handling the institution’s leadership role since April this year.
It was the same BCV that remained a mere spectator when multiple zeros got stripped from the bolivar after one of the longest hyperinflationary episodes in modern history. Also, the central bank, during Maduro’s time, became notorious for not publishing key economic data. And when it started publishing stats, they were incomplete, forcing IFM and World Bank to stop cooperation with Venezuela in 2019.
The task of converting BCV from a mere spectator of government-sponsored economic miscalculations to the lead actor of Venezuela’s transformation will be a painful task. In the near term, the effects of sanctions relief will likely be most visible in exchange rate auctions, with greater transparency and reliability in these operations potentially helping reduce the gap between the official and the black market rates.
This would directly affect people’s daily life, by reducing price distortions, and helping stabilise inflation expectations. It would also reopen the door to multilateral institutions and international markets, particularly renewed engagement with the IMF, a necessary step toward debt restructuring and access to credit.
However, BCV 2.0 should be independent from political pressures, apart from possessing the ability to communicate a coherent monetary policy. This will satisfy Venezuela’s economic discourse, apart from attracting investment. BCV should be the first ‘government institution’ in the post-Maduro era, that should be capable enough to challenge the administration’s economic narratives.
Despite having abundant natural resource, the state-sponsored mistakes of blocking manufacturing development and industrial diversification have resulted in long-term stagnation and inequality.
Wages in the Venezuelan labour market, based on a mix of public sector, state-owned companies, private activities and a very extensive informal economy, are insufficient to cover basic needs. Being a formal employee no longer guarantees an acceptable standard of living, pushing many public servants to take on side jobs, or turn to the parallel economy.
580,000: the exact number of active businesses, that have been destroyed in Venezuela since early 2000s. The tally of 830,000 from the beginning of the 21st century now stands at less than 250,000 today.
With real GDP collapsing by more than 75%, along with hyperinflation, the country has shifted into a de facto dollarisation, where the sovereign bolivar (VES) coexists with the US dollar, which has become the standard for salaries and prices.
More than 7.5 million Venezuelans have left the country since 2015, about 22.5% of the population. Between 2012 and 2017, 22,000 doctors emigrated, as did more than 167,000 teachers. This exodus has created skill shortages in many sectors, while further weakening education, healthcare, and administration.
Reforms: Key weapon for Rodriguez administration
Rodriguez has brought new laws and regulations reversing Chávez’s nationalisation drive, by reopening key sectors, like hydrocarbons and mining, to private investment.
She has formed a ‘Commission for the Evaluation of Public Assets’, that will audit state ownership in other economic areas, such as agriculture, manufacturing and infrastructure.
Another commission has been formed, consisting representatives from the state, business sector, active workers, and pensioners to ‘review labour conditions, address precariousness, and strengthen the social security system’.
An increase in the so-called ‘integral minimum income’ to the equivalent of $240 per month has been implemented for public sector workers. The amounts are set in US dollars but paid in bolivares at the day’s official exchange rate set by the central bank.
The latest adjustment involved an increase of the ‘economic war bonus’ from $150 to $200 a month, alongside a $40 monthly food bonus. The economic war bonus for pensioners has been raised from $58 to $70 a month, and for public sector retirees from $130 to $168.
There will be a new, one-time ‘professional and academic recognition’ bonus, ranging between $60 and $120, aimed at strategic sectors, such as security, education, and healthcare. Labour inspectorates have been told to address workers’ demands regarding employment conditions.
Venezuela’s National Economic Council has been tasked with designing a more ‘efficient’ tax model aimed at making the Latin American country ‘more competitive’.
The Law on Streamlining and Optimization of Administrative Procedures have been enacted, with the goal of modernising public administration by reducing bureaucracy and incorporating digital tools. The law grants the executive authority to eliminate procedures, shorten timelines, and improve coordination between institutions.
Another mixed commission will evaluate which state-owned assets have ‘strategic’ importance, potentially opening some to private investment. However, the hydrocarbons sector will remain under state control.
The energy sector reform
The partial reform to the ‘Organic Hydrocarbons Law’ has now brought more flexible taxation, apart from lowering royalty baseline rates, and repealing previous restrictive levies to incentivise investment.
On the other hand, the electricity sector has been thrown open to private investment, allowing the creation of joint ventures. The sector, under Maduro administration, earned the infamy of lacking both investment and maintenance. Large parts of the country used to endure hours-long electricity outages, affecting water and telecommunications services.
GE Vernova Venezuela recently signed a Memorandum of Understanding (MoU) with the Venezuelan government to add at least 1 GW of electrical capacity to the National Electric System (SEN) within 24 months. The broader objective contemplates recovering more than 5 GW of capacity over the next four years.
As per the Financial Times, Wall Street banks and funds have now set their eyes on Venezuelan oil assets after Trump’s $100 billion investment pitch (that came in January) and recent legal reforms. Lionheart Capital and Elliott Management are among those pursuing deals, while JPMorgan and Jefferies lead investor trips to Caracas. ExxonMobil and ConocoPhillips, however, are in the ‘wait and watch’ mode, citing unresolved governance, contract, and debt issues.
US Treasury issued sanctions waivers allowing select Western firms to operate, and contract disputes can now be settled in the United Kingdom, France, or Singapore under American law. Venezuelan authorities have already revised proposals under investor pressure, removing clauses allowing government termination for ‘public interest’.
By May, Venezuelan oil production moved past one million barrels per day (bpd) for the first time in over seven years. The feat, confirmed by an OPEC monthly report (apart from measured by secondary sources), was made possible due to a massive 46,000 bpd production increase compared to the March-April period.
It has been a good comeback from the abyss of 2019, when the imposition of American sanctions and export embargo on the Venezuelan energy sector resulted in crude production plummeting under one million bpd, hitting a low of around 350,000 bpd in 2020.
The final take: Nurturing democracy
Rodríguez is not out of the woods yet. Democratic transition is another front, where the acting President will be facing tremendous heat in the coming days.
The return of opposition leader Maria Corina Machado, who the Maduro government barred from competing in the July 2024 election, is imminent. However, things have got complicated, with the comeback of Dinorah Figuera, an exiled lawmaker and elected president of the parallel opposition National Assembly that emerged after the 2015 parliamentary election, after eight years. As per the reports, she has the backing of both Trump and Rodriguez.
What kind of political economy will emerge in the Latin American country in the coming days is not clear. However, it is clear that the Latin American country is betting on its natural resources to come out of the decades-long rut.
More than the hydrocarbons, investing in and uplifting the fragile social sector will make the real difference, if the country wants to be a healthy and competitive economy in Latin America in the coming days.