The economic instability in Venezuela began with Black Friday 40 years ago, on Friday, February 18, 1983, during the government of Luis Herrera Campins, who was born in Acarigua in 1925 and passed away on November 9, 2007, in Caracas, at the age of 98.
The Economic Instability in Venezuela: Tracing Back to Black Friday 40 Years Ago in 1983
Black Friday was when the bolivar suffered a significant devaluation against the dollar due to economic policies implemented by the President of the Republic at that time.
These policies included the establishment of exchange controls that imposed restrictions on the outflow of foreign currency and were strongly opposed by the then-president of the Central Bank of Venezuela (BCV), Leopoldo Diaz Bruzual.
For Venezuela, Black Friday represents a milestone that changed its economic history. Until that day, the bolivar had officially maintained stability and reliability, which had characterized it since the second decade of the 20th century, with its last free exchange rate with the dollar fixed at 4.30 bolivars.
“Unpacking the Causes of Black Friday and Its Impact on Venezuela’s Economic Stability: Insights from Economist José Guerra”
According to economist José Guerra, and professor at the Central University of Venezuela (UCV), “Black Friday marked the end of the period of greatest exchange rate and monetary stability that any Latin American country had ever experienced.”
The expert believes that “the seed of Black Friday was sown in the previous government, led by social democrat Carlos Andrés Pérez (1974-1979). The State started to expand, but when oil prices fell, external borrowing was resorted to in order to maintain the pace of spending. During Pérez’s five-year term, external debt tripled, and a highly compromised fiscal situation was generated,” the specialist declared to the BBC.
Guerra recalled that the president of the Central Bank of Venezuela in 1982 stated that it was good for capital to leave the country as it would reduce monetary liquidity and lower inflation.
Venezuelans witnessed a progressive deterioration in purchasing power due to economic measures and political instability experienced in the late 20th century. “But the situation never reached the dire state it is in currently,” Guerra affirmed.