Venezuela’s Economic Crisis: Facts, Consequences, Responses And Solutions

Venezuela has been experiencing the worst moment of its economic crisis in the history, which also include the protests against the government of President Nicolas Maduro. In accordance with the reports by Al Jazeera, the country has the largest oil reserves in the world, but has gradually turned into the poorest performer in the region, concerning the growth of GDP per capita. In fact, Venezuela possessed up to 298 billion barrels of proved oils in 2014, which can greatly finance its food subsidies and social programs, as well as sustain the country’s whole economy. Unfortunately, the oil prices have gone down recently and exerted obvious influences on the system of subsidies. In terms of growth rate, the nation had a negative and disappointing figure of minus 8 percent in 2016. The government tends to control the currency and the prices of basic goods, which may result in limited imports, strained supply, and black markets that strongly influence the prices as well. In addition, it was estimated by the Finance and Economic Development Commission of the National Assembly (AN) that the country’s inflation may close at 679.73 percent this year. The International Monetary Fund made an even higher projection: such inflation will become the highest in the Americas and reach 720.5 percent.

What is worse is the abnormal development of the economy that has caused far more serious consequences. On the one hand, as can be seen from the analyses above, lower oil prices, currency controls, shortages of food, and the rampant inflation have led to the phenomenon of ‘Maduro diet’; making more citizens skip meals, lose weight and become malnourished. The number of Venezuelans that eat two or fewer meals per day increased rapidly from 2015 to 2016; and it is reported that 72.7 percent of them lost an average of 19 pounds in the year of 2016, in accordance with CNN. On the other hand, the country’s public health system has been hit heavily; it is not that easy and convenient to have access to medicine and equipment in public hospitals; around 85 of every 100 medicines are lost in the entire nation, and patients may even improperly take medicines, which can be really harmful to their well-being, according to Al Jazeera. Moreover, as CNN puts it, people in Venezuela are also faced with a lack of home staples, including milk, flour and toilet paper, as well as suffer from rising unemployment, soaring violent crime, and increasing levels of malaria.

Given all these economic problems, people turned their pains to rage and even bigger protests. Maduro has tried to support grassroots production by communes and court private corporations in a bid, in order to guarantee food supply, in light with Jacobin. He also intended to launch an agricultural plan and said that, “from 2017 onwards we will have to talk about the new era […], we are building the new economy with a solid base in the countryside” and continues to say that “this year will be the new post-oil economy.” However, his policies and remarks do not seem to address or alleviate the continuing economic crisis or meet and fulfill the demands of the opposition, including the “creation of a ‘humanitarian channel” to allow medication to be imported to counter the severe shortages in Venezuela,” in a statement released by BBC. In this case, Maduro mainly focuses on the entrenchment of his position, instead of recognizing the opposition to his government. He argues that the opposition has attempted to overthrow his elected government illegally, that the so-called “economic war” being waged in the country is a tool to fight against him, and that a constituent assembly and a new constitution are needed to “neutralize” the opposition, defeat “coup-plotters,” as well as advance peace for the whole society and the whole nation. Meanwhile, he has jailed one of the opposition leaders and stopped another from running, as what have been discussed and analyzed by BBC and Forbes.

According to Maduro, the creation of a constituent assembly is the premise of redrafting the nation’s constitution. In this context, 364 people of the assembly are supposed to be selected by local polls, while the rest of the members are expected to be elected by seven social sectors’ citizens, pensioners, peasants, students, indigenous groups and business people included. Even so, there still exists some critics questioning such ideas. The critics believe that the constituent assembly is a way to override the existing parliament, “setting in place a Cuban-style Congress that would serve to rubber-stamp the executive’s orders” and that the president has planned to consolidate power by undermining the country’s democracy as well as establishing his own autocratic control, as can be seen from the statements by The Guardian and Forbes.

Similarly, the opposition leaders consider the mechanism a strategic delay and an attempt to maximize power. To be specific, they indicate that the process of assembly establishment and new constitution drafting mean that the scheduled regional elections and presidential polls will be delayed. In addition, the constituent assembly may further weaken the national one, which can be regarded as the country’s opposition-controlled legislative body, in accordance with BBC.

As a result, the potential solutions to the crisis can be technical. The government’s actions and inactions, as well as the opposition’s behaviours should shoulder the main responsibility, since they all have damaging economic effects on the entire country. In the government’s perspective, the management of currency is supposed to be changed. In line with The Nation, Venezuela’s present currency system was set up to prevent capital flight in the year of 2003. Most economists suggest that currency controls should not last many years and can be cancelled after the threat of capital flight subsided. Also, it is vitally important that the country develop a diverse economy and become less dependent on its oil sector, since the “resource curse” argument is likely to be true for resource abundant economies, to some extent. Furthering this point is that the economic crisis and the protests are correlated with each other. The former cannot be solved if the latter still continues. Therefore, it is also of significance to think about the differences between the government and the opposition. What the president has called for is not that perfect, but the opposition’s path cannot get blind support as well. When it comes to the political system and institution of Venezuela, problems and issues still need to be discussed in a detailed and careful way, for the sake of the economic, social and political development of the country, as well as the living conditions and wellbeing of its citizens. In the future, maybe negotiations between several social groups can be organized and carried out, since it is one of the most peaceful ways to alleviate or solve these severe problems.