Unconventional Warfare against Venezuela: A Conversation with Pasqualina Curcio (Part I)

A Venezuelan economist discusses the impact of the economic war on the Venezuelan people and the policies that should be implemented in the face of it.

Professor Pasqualina Curcio has written extensively about Venezuela’s economy. Her published work includes numerous articles, as well as the books The Visible Hand of the Market: Economic Warfare in Venezuela and Hyperinflation: an Imperial Weapon. In this two-part interview, Curcio explains how US sanctions compromise Venezuela’s sovereignty, while laying out the policies that she feels should be applied in the face of this unconventional war aimed at destroying the national economy.


The Maduro government has proposed the indexation of banking activity [pegging bank transactions in Venezuelan bolivars to a more stable currency]. You have said that indexing such transactions to the Petro [state-issued cryptocurrency] would be a good economic policy if it were universal. In other words, salaries and the national budget should also be pegged to the Petro. Can you explain your proposal in greater detail?

The Venezuelan economy is indexed and not precisely to the Petro, but to the US dollar. All goods and services, except salaries, are pegged to the dollar. In fact, banking is officially indexed to the US dollar through a Venezuelan Central Bank [BCV] resolution: the dollar is the defining factor when it comes to transactions. In other words, if you request a loan, the bank calculates what is due based on the bolívar-dollar exchange rate when you have to pay the loan back.

The proposal that some colleagues and I have been putting forth is that salaries, and the economy in general, should be indexed to the Petro. That is to say, we should turn the Petro into the country’s accounting unit in order to gradually detach the national accounting from the dollar.

Of course, to make the Petro into a viable unit of account requires establishing one single exchange rate when it comes to its relationship with the bolívar. The calculation should be done as announced by President Maduro in August 2018 in the context of the Economic Recovery Plan: if the value of one Petro is 60 dollars and the exchange rate is five bolívares per dollar, then one Petro is equivalent to 300 bolívares. Then, when the bolívar to dollar ratio fluctuates, the nominal value changes.

This means that the economy as a whole would be indexed to the Petro, including salaries. With this proposal, every time exchange rates fluctuate, the rest of the monetary expressions will also vary, from a kilo of rice or a worker’s salary to the nation’s budget.

In Venezuela, exchange rates fluctuate because of the attacks on the currency in the context of the economic war, which is part of the unconventional war. In fact, we are concerned that [the government’s] economic policymakers do not recognize this problem. This, in spite of the fact that US spokespeople have confessed that there is a coordinated attack against the bolívar.

Unfortunately, our decision-makers don’t acknowledge that the variations in the exchange rate are a consequence of an attack on our currency. Simply put, the bolívar-dollar exchange rate doesn’t depend on supply and demand and its expression on the currency exchange market: it is tied to foreign political criteria in the context of unconventional warfare.

Since the fluctuations in the bolivar’s value depend on an external agent – imperialism in this case – our proposal is: every time these external agents attack the bolívar, and the prices of goods and services go up, salaries and the nation’s budget should also increase in the same proportion.

This will require that the amount of money [bolívares] that circulates in the economy be adjusted accordingly. Unfortunately, there are objections to this proposal, especially from those who operate with a monetarist theory. They argue that an increase in the quantity of money will generate inflation. However, in Venezuela’s case, and as I was saying just now, inflation is not the consequence of a larger quantity of money circulating in the economy.

To prove our hypothesis you just have to look at the evidence: in the last few years, the quantity of money circulating in the economy has actually decreased in real terms as a consequence of the BCV’s monetary policies. So you can’t say that prices went through the roof because the amout of bolívares grew.

Again, inflation in Venezuela is explained by the variations in the exchange rate, which in turn result from external attacks on our currency. That is why we think that we must, over time, adjust salaries and the national budget to protect the purchasing power of workers and the administration of the social services that the state provides.

The proposal of indexing the economy to the Petro seeks to neutralize the effects of the attack on the bolívar. However, to develop a good monetary policy, decision-makers must first recognize that there is an attack on the Venezuelan currency.

Imperialism doesn’t care if the exchange rate is 5, 10, or 20 to 1. It doesn’t care if inflation is at 20 thousand or 130 thousand percent. What matters to its architects is to drive down the purchasing power of the Venezuelan people. However, if every time they attack our currency, the purchasing power remains the same because the salary is indexed through the Petro, then the strategy fails – the imperialist weapon is rendered useless.


What do you say to those who argue that wages can’t be raised due to the fall in production and the drop in national revenue in the context of the US blockade?

We are in the context of an economic war that is not limited to the unilateral and coercive measures against our country. The attacks on the bolívar also affect our production significantly and the economy as a whole.

It is true that the economy has shrunken, and we acknowledge it. However, the attack on the bolívar acts internally. Let me explain: when imperialism attacks a currency, the monetary scale changes. What happens is a kind of monetary hallucination inside the economy.

The normal behavior of the economy can be explained with an example: when the new monetary expression was announced in September [2021] with the elimination of six digits to the right of all monetary expressions, people did not lose their purchasing power. If on September 30 you had 4 million sovereign bolívares in your bank account, on October 1 you had four digital bolívares. In reality, you do not have less money. Why? Because the products that marked 4 million on September 30 have now a price of 4.

This means that the number of bolívares you had in the bank on September 30 will get you the same amount of goods on October 1. To pursue the example further: if your salary was 4 million bolívares, then your salary will be 4 digital bolívares. What changed was the monetary sign, but the values of goods and services remain: the relation between a kilo of rice and your salary is the same but with six fewer digits in both cases.

What imperialism has been doing since 2006 – and with more intensity since 2012 – is changing our monetary scale. For example, in 2012, we paid 8 bolívares fuertes for one dollar. Today, if we were to measure in bolívares fuertes, we would pay 450 billion bolívares per dollar. Imagine that!

Let’s examine this part by part. If two goods are produced in an economy, let’s say rice and flour, ten kilos each, and if each of those goods has a value of one bolívar, in that economy 20 bolívares are needed to exchange for the existing goods.

Let us suppose that in that economy the exchange rate is one bolívar per dollar and suddenly, overnight, an external agent comes and says that the exchange rate is no longer one bolívar per dollar but two instead. What happens? The prices of flour and rice will double. Now the price is not one bolívar per kilo but two.

In this economy, exactly the same volume of flour and rice exists before and after the change, but instead of needing 20 bolívares to ensure the circulation of the goods, 40 will be needed. In real terms, production remains the same and the values of the goods are also the same. What changed is the price of goods, because the monetary scale has changed. Therefore, any increase in the number of bolívares circulating in the economy would respond to the new monetary expression and would not generate inflation. However, if there is a change in the monetary expression and the number of bolívares remains the same, that will eventually impact the production because there won’t be enough money to purchase the 20 kilos of products.

For this reason, we reject the argument that salaries cannot be raised because there are no dollars: salaries are in bolívares and government budgeting as well. There is no justification for not increasing salaries and the national budget in this context.


You have been researching the economic war for a while and also examined the impact of the government’s policies, including its “monetarist” outlook of restricting the money supply. The government applied this policy to limit the spiraling inflation. Yet you believe this policy is not the real reason why there has been a relative flattening of the inflation curve in recent months. Can you explain?

My main criticism of the government’s monetary policy is that it is restrictive. In other words: it reduces the amount of money circulating in the economy.

The attack on the bolívar and the new monetary scale imposed by imperialism means that more bolívares are required to keep the economy moving. In the year 2014, for every 100 bolívares that were produced in goods, there were 80 bolívares in circulation. That says something about liquidity in 2014. Now, for every 100 bolívares of goods produced there are just two in circulation. This is an enormous drop in the amount of money circulating when you measure it in relation to the size of the economy. During the same period, the Venezuelan economy has also shrunk by 78%.

The big question is, why did policy-makers decide to reduce the number of bolívares circulating in the economy? The answer is simple: they accepted the monetarist theory – the quantitative theory of money – which locates the amount of money circulating in an economy as the sole source of inflation. However, as we already said, the quantity of money circulating in relation to the size of the Venezuelan economy has decreased significantly since 2014, which undermines the monetarist hypothesis.

Monetarist theory says that if you put more money in people’s pockets, then those people will demand more goods and services, and that puts upward pressure on prices. However, aggregate demand in Venezuela fell 62% between 2013 and 2017, and we can assume that, even though there are no official figures, that downward tendency continued through last year.

In short, it is absurd to say that there has been an increase in the quantity of money, driving prices up due to an increase in aggregate demand. The BCV data points to the opposite: aggregate demand has decreased. Household consumption is down 50% and government spending is down 30%. The data does not back the argument.

When these decision-makers began to perceive the problem, they said that the issue is not the amount of bolívares circulating in the economy. Instead, they argued that when demand for goods goes up, the demand for foreign currency goes up too, and this causes the dollar to go up and the bolívar to devalue, which in turn generates (hyper)inflation.

This argument has no bearing either. First, as we saw, exchange rate fluctuations have no relation with the quantity of money circulating in the economy. Second, exchange rate variations are really associated with high political conflictivity, such as elections.

That is why we say that one of the main mistakes made by economic policy-makers is that they do not acknowledge there is an attack on the currency, but instead rely on monetarist theory and its premises.

Let us return to the example of the economy in which 10 kilos of rice and 10 kilos of flour are produced. If the change in the monetary scale reduces the currency to half of its former value in relation to the US dollar, now that economy goes from needing 20 bolívares to needing 40 to allow for the circulation of goods… However, if the amount of money in the economy does not increase to 40, then there is only one option: producing less.

As we can see, the drop in production is connected in this way to the application of the monetarist policy. There is a correlation to the falling production: a drop in consumption and worsening of Venezuelan’s living conditions. Further, these policies lead to a reduction in public services due to budgetary restraints, which also affects the lives of Venezuelans.

Imperialism is waging a war against the Venezuelan people – a war that is unconventional but dangerous. What we propose is that policymakers act accordingly to curtail its deadly impact.