Exclusive: Venezuela, sick with hyperinflation, engages the ‘money doctor’ Steve Hanke for a dose of dollarization medicine

For over four decades, Steve Hanke, a professor of applied economics at Johns Hopkins University, has been on a global mission to combat hyperinflation in developing nations. His approach involves linking a country's currency to the U.S. dollar, thereby preventing governments from overspending and causing skyrocketing prices for essentials like rent, medicine, and groceries. He has earned the title "Money Doctor" for his successful counsel to governments across three continents.

Now, Venezuela, grappling with the world's worst hyperinflation at 400% annually, has named Hanke as its Special Adviser on Economic, Monetary, and Energy Affairs. The goal is to implement a full dollarization law, which would eliminate the bolivar and the central bank. Hanke estimates the odds of this passing at 50% to 80%, the best chance for sound money in Venezuela since the last attempt three decades ago.

Venezuela's economic challenges are closely tied to its vast oil reserves. Despite being the world's largest crude oil producer, the country's oil output is only 1.1 million barrels per day, a mere 1.3% of global production. The aim is to boost oil production to 1.3% of the world total, roughly 1.1 million barrels per day, to help reconstruct the country's $250 billion debt, equivalent to 150% of its GDP.

The government's failure to pass laws protecting private property rights is hindering foreign investment. Exxon Mobil CEO Darren Woods has expressed concerns about Venezuela's inability to uphold contract sanctity, making the nation "uninvestible." The country's economy is heavily reliant on oil exports, comprising up to 98% of its total exports. As prices in Venezuela's currency, the bolivar, rise at an alarming 400% annually, stability and price control are crucial for recovery.