Jesslyn Chrishella / 10E - 11

Venezuela Case study

Bolivarian Republic of Venezuela or also known as Venezuela currently
applied a socialism/planned economic system, meaning the government planners
decide how all resources were to be used. They plan centrally what to produce, how to
produce, and for whom to produce rather than allowing firms of many different
producers and consumers to determine the allocation of resources through free market
exchange. Firms do not aim to make profit instead they produced what the
government wanted. There are often shortages of consumer goods and the goods are
usually produced in poor quality. This happens because firms do not intend to do a
good job since they are not required to make a profit. This economic system started
since 1999, in Hugo Chavez’s presidential term. In Venezuela, shortages occur due to
the release of price controls and other policies made by the president and government.

Venezuela is a federal presidential republic country, which is a democratic and

republican system where a president leads an executive branch in a government
instead of a king, queen, or prime minister. The elections of the president are done
democratically, involving people of Venezuela to take part in making decisions for
their country. Here are the last 3 leaders who served as the president of Venezuela:

Rafael Antonio Caldera Rodríguez (1994-1999)

Rafael Caldera was a politician who was elected as the
th
56 President of Venezuela from 1969 to 1974 and again as
the 62nd from 1994 to 1999. During his second presidential
term, in the first year, there was a major financial crisis called
Venezuelan banking crisis of 1994, it was when banks were
taken over by the government. First Banco Latino failed and
then more than ten more banks followed. Companies went
bankrupt due to exchange rate regimes that are enforced by
the government. This troubles them to obtain currency and
buy goods and services, affecting the people and causing
imbalance in the economy. Extreme inflations happen towards
many goods and services like food, transportation, and
clothes. But, even so, Caldera rectified these problems, and obtained Venezuela’s
economy slightly back on track.

Hugo Rafael Chávez Frías (1999-2013)

Hugo Chávez served as the 63rd president of
Venezuela. He became president for 3 consecutive terms
through 1999 to 2013. The country turned toward socialism
as he got elected. During his first year in office, he proved
his country with his numerous achievements in making
Venezuela better. He advocated an end to corruption,
increased spending on social programs, and redistributed
the country’s oil wealth. But, the Venezuelan government's
overspending on social programs and strict business
policies causes imbalance in the country's economy,
inflation, poverty, shortages also occur. In 2010,
Venezuela’s poverty and income inequality decreased,
more people could read and health care services are enhanced. However, in 2017
NACLA stated, “reductions in poverty and inequality during the Chávez years were
real, but somewhat superficial ... structural poverty and inequality, such as the quality
of housing, neighborhoods, education, and employment, remained largely
unchanged." In January 2013, the Chávez’s government won’t allow private sectors to
build firms. The WSJ gave Venezuela's economic freedom a low score of 36. 1,20
points lower than it is in 1999, ranking at 174 out of 177 countries. Chávez ignored all
other economic systems of the world and chose the planned economy system. On
March 2013, vice president Nicolás Maduro announced Chavez’s death, which was
caused by an illness that he suffered for nearly 2 years.
Inflation rate of Venezuela:

Nicolás Maduro Moros (2013-now)

Nicolás Maduro was the vice president in Chavez’s
term of presidency. Due to his death, Maduro was positioned
as an interim president and won the presidency election 14
April 2013. He still uses the same system used by the
previously, but there was no change in the economy and is
still sitting on the first place of the misery index as the most
miserable one. An economic depression happened in 2014,
this problem hadn’t been solved until this current time. Oil
barrels are decreasing 13% from Chavez’s years so does the
gold rate which decreases 64% and iron produced, decreases
49%. Unfinished projects, electricity troubles, and less health
supplies. I personally think that Maduro’s year is even worse
compared to Chavez’s, as problems that occur overshadows those that are solved.
 Venezuela was once the richest country of the world, holding the largest
supply of crude oil, until it unfortunately collapse on the hands of the government.
The country’s economical state has gotten worse and worse each time. They were
running out of food and people are starving. "There are people in Venezuela who are
literally starving. This is apocalyptic stuff," says Eric Farnsworth, vice president at the
Council of the Americas, a business organization. "I would call Venezuela a failing
state." Venezuela ships in food primarily from Brazil, Colombia and Mexico because
the government stopped planting crops on its rich farmland years ago. These
shortages are so bad even shelves at the stores are empty and Venezuelans even
search for food in the garbage. Prices of goods and services also experience
hyperinflations. Not only food shortages, medical shortages are worse. Hospitals are
overcrowded with sick children and doctors don't have enough medicine or X-ray
machines.

Even now, Venezuela has not paid their debts to Russia and china. Back in
2014, they owed almost 50 billion USD to China and 5 billion USD from Russia.
Even these loans are used to pay debts to the oil creditors and fuel oils. Now, they
only $10.5 billion in foreign reserves left and according to the country's recently
released financial report, about $7.7 billion of its remaining reserves is in gold.
So, to make debt payments in the past year, Venezuela shipped gold to
Switzerland. Massive government overspending, a crashing currency,
mismanagement of the country's infrastructure and corruption are all factors
that have sparked extremely high inflation in Venezuela. Inflation is expected to
rise 1,660% this year and 2,880% in 2018, according to the IMF.

Actually, Venezuela has hidden potentials within them, the country has fertile
land for agriculture supported with a good climate, and they’ve got petroleum, which
is a great resource for the country to earn money. Venezuela holds the 57th position as
largest export activity in the world. In 2015, they exported a worth of $34.3 Billion.
Their import activities ranks 66th out of 221 countries, reaching $27.5 Billion.
Venezuela is a vibrant country, boasting beautiful beaches, tropical islands, majestic
mountains and glorious national parks ready to be visited. Like Canaima National
Park, Los Roques Archipelago Beach, and Morrocoy park. These tourist destinations
can boost the country’s economy. As tourists visit to a country, they increased slaes in
the local community and gave larger revenues from goods and services that are
purchased like food, clothing, hairdressing, medical services, and transportation
needs. Actually, Venezuela is a country that can excel in their economy. Seeing their
rich natural resources, they have potential. If only it was managed and used well,
Venezuela would have been able to have a better economy.

Sources:
 wikipedia.org/wiki/Venezuela
 wikipedia.org/wiki/Nicolás_Maduro
 www.britannica.com/biography/Hugo-Chavez
 wikipedia.org/wiki/Rafael_Caldera
 www.cato.org/blog/worlds-most-least-miserable-countries-2016
 www.focus-economics.com/country-indicator/venezuela/inflation
 www.marketplace.org/2016/03/21/world/venezuela-hot-dog