Critical Thinking

“Venezuela under Hugo Chávez and Beyond”

Under Chávez’s leadership, what kind of economic system was put in place

in Venezuela? How would you characterize the political system?

In the era of Chavez socialist economic system was in placed. Chavez was against the

capitalism and he had run many campaigns against the previous government discussing the issues

like corruption, economic mismanagement, and capitalism. Furthermore, in Chavez’s Government he

took control of all the essential production of oil, sugar, rice. He also took control of lands,

industries, mines, equipment, and all sort of businesses which can one think off. He did not pay the

money two the owners and seized their asset. This cruelty gave him help to have higher prices of oil

in the country and he used it beautifully to obtain political advantage. He started many social

programs which were for the poor. Poverty was one of the major issues in Venezuela, whenever

there was election, he got majority votes because of these programs. It was a democratic form of

government in which people are involved (alvarez 2019).

During the Chávez years, many foreign multinationals exited Venezuela or

reduced their exposure there. What do you think the impact of this has been

on Venezuela? What needs to be done to reverse the trend?

Venezuela largely depend on oil production. Its 70% exports are of oil. Once oil price falls

this country suffers a lot. In 2006 Chavez announced some new policies for foreign companies in the

country. He reduced their shares in the oil projects and increased the shares of state-run oil

companies. But these policies have drastic effects on the economy as in 2006 a sharp recession in

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economy was observed due to the low investment in oil projects. It also causes the low production of

oil when there was high demand and the state-run oil companies could not fulfill the demands.

To reverse this situation there is need of change of the government in Venezuela. The new

government should reduce tax on foreign investors and give them certain incentives. It needs to make

sure that there is political stability in the country, they should invest in local business to help it stand

from the ground. This will help to make the investment proposition more attractive for foreign

investment (Clark 2020).

By 2016, Venezuela’s economy appeared to be on the brink of total

collapse. What do you think needs to be done to reverse this?

In 2016 Venezuela was at the brisk of collapse. To reverse this, they need to take the

following steps:

 Venezuela mainly depends on the sales of oil they need to change this approach. They should

consider other industries so that there could be more the one source of sales.

 Government should encourage the foreign investment by reducing the tax rate and give them

certain benefits like security, safety of their equipment etc.

 The successor of Chavez who is Nicolas Maduro has rejected the aid from foreign countries

because it will hurt his “domestic credibility”. But now in this situation he should accept the

aid and use it to make the economic situation better in the country.

 Make the political environment safe for investors. As they should feel secure and have no

doubt that Government will seize their property.

 China has been a big supporter to Venezuela and has lent it $60 billion. But now china is also

hesitating because Venezuela is not paying the loan back and they are increasing day by day

(n.d). So, Venezuela need to gain the trust of China again by paying back at least some loans.

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References

1. Alvarez, J. (2019). Under Chavez's leadership, what kind of economic system was put in

place in Venezuela? How would you characterize the political system? Retrieved April 03,

2021, from https://www.quora.com/Under-Chavezs-leadership-what-kind-of-economic-

system-was-put-in-place-in-Venezuela-How-would-you-characterize-the-political-system

2. Hill, C. W. L. & G. T. Hult (2018). International business: Competing in the global

marketplace (12th ed.). New York, NY: McGraw-Hill. 

3. Clark, M. (2020, December 04). During the Chavez years, many foreign multinationals

EXITED Venezuela or reduced their exposure there. What do you think the impact of this has

been ON Venezuela? What needs to be done to reverse the trend? Retrieved April 03, 2021,

from https://www.quora.com/During-the-Chavez-years-many-foreign-multinationals-exited-

Venezuela-or-reduced-their-exposure-there-What-do-you-think-the-impact-of-this-has-been-

on-Venezuela-What-needs-to-be-done-to-reverse-the-trend

4. Sep 15, 2. (n.d.). How Venezuela could come back from the brink of collapse. Retrieved

April 03, 2021, from https://knowledge.wharton.upenn.edu/article/how-venezuela-could-

come-back-from-the-brink-of-collapse/