Economic Crisis in Venezuela Roots and Reasons By Ahmed Ehsan

Economic Crisis in Venezuela Roots and Reasons By Ahmed Ehsan

International, Issue

Venezuelan, one of the richest countries in the world is now one of the poorest. The oil-dependent economy at present facing an unprecedented hyperinflation that Bolivar-Venezuelan currency is considered just a piece of paper and nothing else. You literally spend seven or eight digit sums to buy staples like flour, rice, bread or some other reasonably nutritious and filling carbohydrate foods. If you need to buy an egg, you have to pay more than 100,000 bolivar and may be more because the price of products is rising 2 or 3 times a week. The supermarkets are empty of foods, pharmacies are unable to provide medicines to their patients and hospitals are supporting 1000 people with just one bed. Very troubling and disturbing situation is going on there, indeed.
Every crisis has some root causes, leading us to understand that very problem of why that is happening. Venezuela is a country blessed with largest crude oil reserves in the world. One of the members of OPEC (Organization of the Petroleum Exporting Countries), its economy is overwhelmingly dependent on oil exports. Almost 96 percent of Venezuelan exports is accounted by oil. Along with several causes, this is one of the most severe causes that triggers today’s crisis. Over-dependency on oil cut down government’s necessary concentration on other sectors which bolstered Venezuelan economy in the past, for instance, agriculture and manufacturing industries. Corruption, self-serving politics mostly done by elite minority at the expense of mass people, social injustice and inequality all led to this hyperinflation, estimated by Effecto Cocuyo, a Venezuelan media, is 1,698,488%!

Economic Crisis in Venezuela Roots and Reasons By Ahmed Ehsan

What we are seeing at this moment is not the product of the current Maduro regime. Yes! We see the outcome of inefficient governmental system but the manufacture of this crisis has originated from Hugo Chavez era. This figure was considered heroic and brave among the Venezuelans and if I am not exaggerating, among the oppressed people in the Middle East and those who hate western interventionism. He dreamt of self-sufficiency not only for his country but also for the whole Latin America from the major powers. When he ascended to the throne in 1999, he found his country’s economy is the envy of the region. It was the richest country in South America with immense per capita income and steady flow of USD revenue. With the huge income of oil exports, Chavez wanted to experience how socialism looked like in this country. He spent foreign income that oil produced for social services. The result is that, the poverty was alleviating, unemployment was shrinking and people were becoming richer and richer with millions of money in their hands. They spent money from reserves without flourishing and ensuring different and diversified source of income.

Economic Crisis in Venezuela Roots and Reasons By Ahmed Ehsan

They depended on oil income but did not develop industries which could support their economy and would be alternative to the oil if failed to serve. Chavez took several other policies such as fixed exchange rate, nationalization of industries, installation of subsidies for foods and other consumer goods and import controls etc. The idea of socialism borrowed from Fidel Castro, helped Chavez to install control over private industries. But during the heyday of his ruling, he was not criticized from the mass people. The reason was he did not make life complicated by central ruling. Spending from oil income and borrowing services from the outside by foreign currency, Hugo Chavez successfully controlled the people. Underneath, the system is decaying. During his time, since 2004, oil price on what Venezuelan economy is founded, boomed. Lots of foreign capitals made their way to Caracas and enhanced the life of Venezuelans and strengthened Chavez’s power. Though West criticized him and imposed sanction for several times, for his generous care of his nationals, no unprecedented protest did happen. Venezuelan government managed the latter, supplied that “all” to their people, but failed to perform the former, thinking from broader sense because they had become the ultimate beneficiaries. They got the legitimacy to control the people’s emotions plus wealth as bonus. And when the honeymoon period of Chavez finished by his death and eventually prices of crude oil had been collapsed since 2016, that was the moment the undercover economic earthquake hit the ground, shook the economy, realized the problems, but it’s too late.

Economic Crisis in Venezuela Roots and Reasons By Ahmed EhsanPeople started to suffer from shortages of foods, medicines and other basic necessity once they fully enjoyed as citizens. From the ones living in a developed country like the West and the USA and Canada to living in a state where all the money at their hands become useless is one of the major, if not the major, social, political and economic catastrophes ever experienced by them. During the period of oil boom since 2004, Venezuelans earned $100 per barrel and when Maduro came to power, eventually that price was collapsed to $30 per barrel. Some political analysts argued there was behind the US and Saudi Arabia. Since the Chavez period to all the way to Maduro period, Washington was the bitter foe of Venezuela. There are several reasons but one of the prominent was Chavez, though was not a socialist rather democrat, leaned towards Cuba and Fidel Castro, with whom the USA has historical rivalry. When Chavez announced social democracy in his country, it became quite clear that Washington would face problems dealing with Caracas, although the former exports crude oil from the latter and Venezuela has one American company, Citgo, which refined the crude oil. Economically they have strategic and interest-based ties but politically it has been deteriorating for a long time. When Maduro succeeded Chavez in 2013, things had not been changed. The usual rivalry has increased. For the popularity Chavez got from his people, Washington knew it was quite impossible to topple down him with their puppet government. When Maduro became president and political, social and other problems pumped up and people start resisting, US administration wanted to use the opportunity to install de facto colony so that it can establish control over vast oil resources through its supported authority. The first hit Washington stroked was creating oil price collapse through Saudi Arabia. Russia, Iran and other oil resourced countries eventually recovered the loss they suffered from the collapse with other alternative industries so their economy experienced the slow hit. So, who got the mighty hit by the disaster? It is Venezuela and you can obviously guess the reason, that is, it did not develop alternative industries like Russia, Iran and its other OPEC partners. So what then? Income is less than spending and there are millions of Venezuelans who are waiting for social services the government provided them. The Maduro government sensed the danger of people uprising if it fails to serve them and they failed. Government revenues have fallen, and that’s why they cannot import foods and other necessary commodities. And as a result, inflation occurs. People are millionaire, billionaire but cannot buy foods. They have no other option as there is not enough production by agriculture or domestic industries. Venezuela has decreased dependency on agriculture and manufacturing to invest more money on extracting natural resources and that’s why they need to import foreign products to support public services. Forbes reported “Domestic production decreased after years of added regulations (price controls, for example) and inefficient operations of nationalized businesses. Nicholas Maduro administration has already raised minimum wage four times last year so that people might able to buy products with changing price. Irony is when the ability of people increase to buy, prices of products also increases because merchants and sellers all know people have the ability to pay the certain price because they need those things. Maduro lopped five zeroes from the currency to arrest the hyperinflation. Government also started to print more paper money which ultimately made the situation worse. The amount of money is now higher than amount of products they have demand and the values of bolivars is devaluating. Investors also lost interest to continue business in Venezuela as they know they have to pay relatively more money to buy things. Inflation has turned into hyperinflation that all the money has become useless that people now making fun out of those mere paper.Economic Crisis in Venezuela Roots and Reasons By Ahmed Ehsan

People are evading their country and those who cannot are in the streets protesting against Maduro government, what could they do? They are dying; no food and no medicine. Security system has destroyed so people are either robbing banks or kidnapping people. Maduro is too adamant to resign; National Assembly leader Juan Guaido declared himself as the legit president of Venezuela. The analysts are signaling that the USA is waiting for the moment when they can intervene here to re-establish so called “people’s right”. The world is divided over the crisis, that very crisis is intensifying but the fake millionaires of Venezuela are paying their price. Elizabeth Torres, an unfortunate Venezuelan described their status to ABS-CBN news saying:
“We are millionaires of lies. What we are is poorer.”

The writer is a student of University of Dhaka.