Venezuela Crisis

Introduction:

Venezuela was the world’s most praised country; it enjoys the golden past being an outstanding
democratic country. All the institutions used their powers according to constitutional liberty
given to them. System of checks and balance was equally good. However, this golden era took
U-turn with political changes as Mr Maduro was elected who started establishing the
authoritarian system and promoting communism that ultimately led the country to rough routes.
And currently, the country is facing dark time and time of crisis. For years, Venezuela has been
trapped in a downward spiral of increasing political unrest fuelled by rising hyperinflation,
power cuts, and food and drug shortages. In recent years about four million Venezuelans have
fled the country. In Venezuela, President Nicolas Maduro’s government and the opposition are
engaged in a bitter battle for power. Over the last four years GDP drop by 35 % that was seen in
Europe during the great depression. There is also the highest rate of violence being carried out in
Venezuela.

The reason for all the disturbances in the golden way of Venezuela is political disturbance and
heavy oil dependence. No matter how much a country is the owner of natural resources, but it
should keep itself versatile in earning revenue. More than that, the major problem was an
inclination towards communism that aimed at turning everything state-owned and ultimately
ending sense of competition and that of ownership. This all gave way to a crisis in Venezuela.

Major Causes of the Crisis:

Chronic shortages of food and medicine, closure of companies, unemployment, deterioration of
productivity, gross economic mismanagement and high dependence on oil.

Venezuela before the Crisis:

Venezuela, as we know, is rich in oil reserves. The president of Venezuela Hugo Chavez took
charge in 1999 and remained president till his death (2013). He tried to pull out his country from
poverty. Chavez attempted to use these oil reserves as an opportunity, and he started to trade
with different countries to get the benefit.

Oil Boom:

Venezuela benefitted so much in early time (2000). The price of oil in 1999 was approximately
10$ per barrel. When Hugo Chavez became president, it gradually rose to almost 133$ per barrel
in 2008, which was good for the country.

In a period between 1999 to 2015, the Venezuelan government made nearly $900 billion from
only oil exports, with about half ($450 billion) earned between 2007 and 2012. GDP rose from
28% to 40% between 2000 and 2013.

President Maduro and the Oil Price Decline:

Everything was going excellent until Chavez was seriously ill and was diagnosed with cancer.
He died in 2013. The biggest mistake of President Chavez was that he never saved money but
spend all money on the spot when it came, which was a significant cause of the crisis. Before the
death of Chavez, he picked his successor to run the Country Nicolas Maduro, in the era of
Maduro the prices of oil were so declined because he inherited economic policies which were
widely regarded as unsustainable and excessively dependent on oil exports. And the prices of oil
began to decline and crashed in 2014. Venezuela’s economy is estimated to have contracted by
nearly 35% between 2012 and 2017. And this was the start of the crisis which became worse.

Venezuela, in a result, again came to its actual Position and became a poor country. Venezuelans
were striving of hunger, and they did not have any medical facility, inflation also arose there was
no value of the currency and the economic system of Venezuela crashed.

Inflation, Unemployment and Deterioration of Productivity:

The fall in oil prices strained public finances; instead of changing fiscal policies through a tax
increase. The Maduro government has tried to counter its rising budget deficit by printing
currency, which ultimately contributed to inflation. Inflation, about 20% in 2012, was projected
to exceed 1,100% by the end of 2017. Unemployment in Venezuela is projected to reach 26 per
cent in 2017, more than threefold in 2012. At that time when president Chavez was in charge,
Venezuela became too stable. He ordered many companies to quit and to stop producing an item.
And decided to take these all items from different countries and started import. This was a
mistake, indeed that he did. At the time of crisis, no companies were producing any good, and
people strived. There was no food, no medicine which also affected peoples.

Effects on Citizens:

In 2017 hunger had escalated to the point where almost 75% of the population had lost an
average of over 8 kg in weight, and more than half did not have sufficient money to fulfil their
basic food needs. It is estimated that in 2019 25% of Venezuelans need some form of
humanitarian assistance. Venezuela is the third country in the world with the most crime.

Hyperinflation:

In 2014, the inflation rate reached 69%. In 2015, the inflation rate was 181%. The rate
reached 800% in 2016, over 4,000% in 2017 and 1,698,488% in 2018. The International
Monetary Fund predicted that by the end of 2019, inflation would hit 10,000,000 per cent. In
Venezuela, a cup of coffee is almost difficult to afford. Less than two years ago in Venezuela, a
cup of coffee was worth 450 bolivars. Today it costs 1 million bolivars. Venezuelans are
millionaires, but they are poor.

Crime and Human Rights Violations:

Caracas, the capital of Venezuela, has the second-highest murder rate in whole the world.
Kidnappings have increased. It occurs from homes, hotels, unauthorized taxis and the airport
terminals. Carjacking, ATM Theft and Robbery are common. Most crime in Venezuela remains
unpunished (98% not resulting in prosecution). Caracas (Capital of Venezuela) is 3rd most
dangerous city in the world.

Food, Medicine & Health:

There is a significant shortage of food, medicine, water and other services. This leaves
people desperately searching for food. The whole country only produces 30% of the food which
it needs to feed its overall population. The health system is close to collapse. Previously defeated
diseases for example, cholera and malaria are on the rise in the country because of shortage of
vaccines and medicines.

Migration:

Over four million Venezuelans, around 13 per cent of the country’s population, had
emigrated since the revolution began in 1999, out of desperation. Colombia is hosting 1.4
million. Other hosting countries include Peru, Chile, Ecuador and Brazil.

Unemployment & Poverty:

UN report estimated in March 2019 that 94% of Venezuelans live in poverty. In 2016 the
unemployment rate was 18.1% and 26% in 2017. Now, it is forecasted to reach 44% in 2019.

Conclusion:

Venezuela is facing economical as well as a political crisis since 2013. This all was due to short-
term policy of Hugo. Venezuela economy required about 30 billion dollars yearly to become
stable. In 2018, Venezuela’s debt grew to US$156 billion In November 2017; The
Economist estimated Venezuela’s debt at US$105 billion and its reserves at US$10
billion. Venezuela’s debt rose to US$ 156 billion in 2018, and its reserves had plummeted to
US$ 8 billion as of March 2019. The only solution to stabilize Venezuela economy is refused to
pay the illegitimate debt as many countries did the same like Argentina, Paraguay, and Ecuador.
There is an organization called CADTM, which work for illegitimate cancellation debt for
developing countries.