What is Happening in Venezuela?
This week I will be focusing on the financial crisis in Venezuela that has been occurring since 2012. Venezuela is a South American country located at the northernmost point of the continent opening up to the Caribbean Sea.
The country has a deep political history rooted in colonialism. Venezuela was the first area to be visited by Christopher Columbus in 1499. Following the introduction to European Civilization the country then became colonized by Spain in 1521. However, with tensions high against the colonial power Venezuela declared independence in 1810 (BBC Timeline). In the years to follow there was a political struggle between various political parties over the rule of Venezuela. An important find in the early 1900’s was that Venezuela has one of the worlds largest proven oil fields. This has made the country the number five oil producer in the world. At an economic standpoint oil is their largest export which is mostly bought by the US (BBC Timeline). (Figure 2 is the oil production of Venezuela)
Amidst the discovery of oil Venezuela was under Democratic rule which was often corrupt and lead to an economic depression. This history of Venezuela lead to the ability for Hugo Chavez to gain power within the government. From 1992-98 Chavez threw various military coups which lead to his imprisonment but ultimately in 1998 he was elected to be President of Venezuela. His Socialist/Populist ideologies were immediately set into Venezuelan policy and society. He drafted a new constitution, anti- US foreign policy, and “laws aimed at redistributing land and wealth” (BBC). The direct reason why Venezuelans are in such debt and despair is due to the programs and nationalization of industries by Chavez. His programs to eradicate poverty had the opposite effect when he increased the national debt to a level where the previously wealthiest country in the region could not pay back. Instead of dealing with the debt by creating programs to pay it back or ask for international help Chavez and his successor Nicolas Maduro hyper inflated Venezuelan currency (Aljazeera). The country has gone to shambles as Venezuelans experience rolling blackouts for days, extreme food and medicine shortages. With global oil prices decreasing along with an economy on the brink of exploding, Venezuela needs international help. With around $140 billion dollars in external debt Venezuela might need to go into financial default (BBC News). Suggestions to the government in order to not default are as follows. Become self sufficient in food production, with over 24% of food imported the price of food has skyrocketed resulting in people being unable to eat for days in the current economy. The next way to help the economy according to Fortune, would be to stabilize the currency. In order to halt inflation the government would have to let currency “float” near the black market dollar to beat the cycle. This process could take years but in order to eliminate the influence of the black market and create a healthy economy it must be done. With help from the international community Venezuela could be put back on the map with major economic adjustments. (Figure 3 Hugo Chavez)
Amid the severe shortages and heavily indebted economy the Venezuelan people have been dealing with horrible living conditions. With lines that take practically all day to receive weekly/daily rations the people of Venezuela cannot continue on this path. With protests almost constant in the streets of Caracas and other major cities the people are detained and “abused by security forces” (Human rights Watch). It is evident that there is a major crisis at hand in Venezuela and the people of the country deserve better. Hopefully, the news media will broadcast the crisis more heavily gathering international attention to the issue.
(Figure 4- lines in a Venezuelan town for food distribution)
Works Cited
http://www.bbc.com/news/world-latin-america-19652436
http://fortune.com/2016/02/20/venezuela-oil-bolivar/
http://www.bbc.com/news/world-latin-america-41967871
https://tradingeconomics.com/country-list/external-debt?continent=america
https://www.hrw.org/world-report/2017/country-chapters/venezuela
February 15, 2018 at 5:17 pm
Venezuela is a country that I haven’t heard much of in recent years. Given the horrible humanitarian crisis that seems to be transpiring, I’m surprised that nothing seems to be done about it. Despite the fact that this issue clearly hasn’t made it into the American news cycle, I certainly hope that something as extreme as this will garner some international attention. I only wonder how any other atrocities are going unnoticed and if we have the resources to address all of these different crises.
February 15, 2018 at 5:19 pm
It is really interesting how this country is still struggling from colonization. Another interesting point is that socialism and communism do not work well in reality as it leads to massive amounts of debt and hyperinflation. The Venezuelan currency is literally worth nothing. Overall, excellent blog once again.
February 15, 2018 at 5:34 pm
The Venezuelan situation is a prime example of socialism gone wrong. The government tried to do too much because of their oil-producing capabilities and are currently stuck in a place where they want to move away from socialism, but this would be nearly impossible because of the failing currency and social programs in place. Without an international player stepping in and saving them, I don’t see Venezuela digging themselves out of this hole anytime soon.
February 15, 2018 at 5:46 pm
My dad and I often joke about paying each other back in Venezuela dollars, but I feel kind of bad about it knowing people are actually suffering. I think the situation shows why it’s important to have leaders who understand economics, because government intervention impacts people’s lives at the smallest levels.