VENEZUELA’S ECONOMIC CRISIS

Venezuela used to be the richest country in Latin America. But now it’s falling apart. If
you have turned on the news lately you’ve probably seen stories about protests, food
shortages and massive inflation. So how did Venezuela go from this to this?

Venezuela has the world’s largest oil reserves. And oil exports make up over 95%
(percent) of the country’s income. Meaning if it doesn’t sell oil there’s no money to spend
on top of that Venezuela hasn’t been taking good care of its other facilities and the state-
run oil company hasn’t paid out subsidiaries. So these companies started producing less
oil a lot less. The oil price has also plummeted which leads us to the next problem.

How Venezuela uses its money? Protesters say Nicolas Maduro and his predecessor Hugo
Chavez ran the country to the ground. In 1998 Chavez launched a political revolution
with a new constitution and socialist economic and social policies all boosted by high oil
prices. He started redistributing land and wealth. He nationalized oil finance agricultural
and industrial companies. He fixed prices and devalued the exchange rate with the US
dollar. These policies helped a lot of people. But with less money coming in the system
collapsed by the time Maduro took over.

Now the country is down to its last $10 billion of which $7.7 billion are in gold and can’t
be spent in a hurry and it was roughly 7.2 billion outstanding debt this year. Because of
all this currency the bolivar has lost 99.8% of its value in the past five years. So here’s an
example: $100 of currency in 2012 would be worth just 20 cents in 2017. Inflation
reached an all-time high with 800% in December 2016 and the IMF estimates it’ll go up
all the way to 1,134%.

Let me visualize that, that means that liter of milk that may cost one dollar before could
end up costing roughly 11 dollars by the end of this year in the country where 80% of
people live in poverty that’s just not affordable. And it makes things especially hard if
you’re a country that gets most of its food from abroad.
Food and supplies have become so scarce as a result of inflation and price controls they`re
being sold on the black market instead of stores with a large part of the country on the
brink of starvation food trafficking has become the biggest business in Venezuela. So
Maduro put the military in charge of managing the country’s food supply. But AP
investigation found that the military its own black market and takes brides from food
importers to be fair there were shortages under Chavez, too. But under Maduro they
become even greater. Surveyed in fact that ¾ (three-quarters of Venezuela of Venezuela’s
adult population lost and average of 8.7kg in the past year. People also struggle to get
their hands on life-saving medical supplies.

The country is lacking of the 80% of basic medical supplies leading to drastic
consequences. Venezuela is in a vicious cycle of bad policies and the worse luck. It’s
been at the top of the world misery index for three consecutive years.

So then why is Maduro still in power? Venezuela’s poorest haven’t taken to the streets so
far. They’re afraid to lose some of the benefits they gained under Chavez. And Maduro’s
support base goes beyond just the poor. He has the military on his side because he’s been
keeping them happy by providing jobs, food and basic supplies. Empowered by the
support he’s been accusing the opposition of encouraging violence and training children
for terrorist groups which is what he likes to call the protesters. Now he wants to create a
popular assembly that can rewrite the constitution and he declared a state of emergency.

The opposition is afraid the assembly will be entirely made up of pro-Maduro parties. So
they’re calling for new elections and Maduro’s resignations. Since April first 2017, 67
people have died in the protests. Hundreds have been injured and thousands arrested.
Mediating the standoff will be a tough mission even for the Pope.