Venezuela, as of today, has the highest inflation in the world. People are barely surviving by scouting for food from the garbage, basic necessities like health care and medicines have disappeared, violence has gripped the country, and about 2.3 million Venezuelan citizens are on the move as it faces the largest recession in the Western Hemisphere history – bearing effects almost twice as large as the consequences of the 1929-39 Great Depression.
The roots of the crisis can be traced back to December 1998 when President Hugo Chávez gets elected as the President. Based on Venezuela’s massive oil reserves, Chávez decides to introduce new forms of social policies and begins his ‘Bolivarian Revolution’ that redistributed the oil wealth to the people who needed it more; hailing it as an “option to build a developed, modern, productive and diversified economic model to develop the country.” The government established several social programs known as ‘Misiones’ which gave people access to academic training, the university systems, scholarships, identity cards, citizenship rights, etc. in a very clear effort to provide fundamental social services.
However, this social change was being brought through the deepening dependence on oil. When Chávez was elected, oil prices had stabilized at nine dollars per barrel and by 2004, prices had reached a peak of $85 per barrel. This high price of oil gave him access to finance – allowing him to borrow from foreign countries carelessly. By the time his eighth year of presidency rolled around, he bought out Banco de Venezuela from Spain and started to nationalize the economy, even the big sectors. Private businesses were lost, people were being prosecuted and their assets were being seized by the government. The government then started importing cars, clothes, food, medicines – basically everything – while in the process destroying the production capacity of the country. The initial Chavist model had relied on making the Venezuelan economy robust to oil price bust, but now the country was borrowing out of fashion while spending it all.
By 2012, after outcomes of the 2008 Great Recession led to capitalist markets declining offers to lend any more to Venezuela and in 2013, when President Chávez passes away due to cancer and his hand-picked successor, Nicholas Maduro gets elected, the economy is already tumbling down. As of June 2014, the prices of oil started to go down. Suddenly, with no savings, the Venezuelan government was burdened with a stock of foreign debt valued at $150 billion and did not even have enough to import essential food goods. Scarcity purged across the nation and the government rushed to renegotiate with debt holders, but the imposed U.S. sanctions made it harder for Venezuela to roll over its debt. Furthermore, economic activity collapsed in 2015 and then went down the drain in 2016 and 2017, causing Venezuela to fall apart.
The ongoing economic crisis has led to the middle and lower class suffering the most with inflation reaching up to 13,000,000% within 12 months. Studies by Caraballo-Arias, Madrid and Barrios in 2018 reported that since 2017, 90% of the people have moved to live below the poverty line, 75% of its population on average has lost over eight kilos (19 lbs) in weight, higher crimes rates have made it one of the most violent countries in the world (Los Angeles Times), and diseases like widespread Malaria have settled in. Oil politics in the region have led to other self-interested countries intervening in its administration on a daily basis causing much more upheaval and havoc.
President Maduro has done nothing to address these issues. He may try to wash his hands of it, but at the end, he is the president and the one responsible for the people who have put their faith in him.
She's a bubbly, nerdy economist with a passion for reading and always prepared with a hot cup of cocoa to work towards solving global issues. Her fascination with new places, academic research and challenges has led her to the United States, where she's currently undertaking an exchange semester at the Wharton Business School, University of Pennsylvania.
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