Venezuela has had a rocky economic history. As an oil-rich nation the country has enjoyed periods of growth and increasing prosperity, but under past President Hugo Chavez, government spending on populous causes like cheap gas, expropriations of foreign corporations, and funding of other populous leaders across Latin America often undermined growth and led to government deficits. Many of Chavez’s economic policies, along with accumulation of military and political power have accelerated under current President Nicolás Maduro.
Currently Venezuela is experiencing power cuts, hyperinflation, food shortages, and medicine shortages. Inflation has now reached 1 million percent and there are about 2.3 million economic refugees. One US dollar is the same as 248,000 Venezuelan Bolivars.
Venezuela’s economy depends on the production and export of oil, and the country possesses one of the largest reserves oil reserves, particularly of high-quality crude oil. In the past, the health of the Venezuelan economy was tied to oil exports, so when the price for declined significantly in 2014, Venezuela faced the challenge of not having enough money to import goods. In response, the government continued to print money and increase wages – a classic recipe for hyperinflation matters.
A financial analysis of Venezuela’s economy shows a decrease of oil production and reveals the fiscal debt to be at about 20% of the country’s GDP. Now very little data is coming out of Venezuela, and that forthcoming is generally unreliable.
In an attempt to improve the economy, the Venezuelan government has produced a new currency called the “sovereign bolivar” and linked it to a cryptocurrency called the petro. The government claims that the petro has raised $735m for the country, but many are skeptical since there is no proof of this increase. The Venezuelan government has further asserted that behind each petro there is a value in oil allowing the cryptocurrency to soon be used in international trade. Although the government has launched the petro, ironically, the use of BitCoin has increased significantly in Venezuela at the same time.
Venezuela has started to use other methods to further try to save their economy. The Venezuelan government has allowed its citizens to invest in gold bars to improve their income. The government puts their own price on gold instead of using the international market price. The price differential has only created more doubts about the trustworthiness of the government.
Urban farming has also been a program that was launched to help the economy. Maduro implemented urban farming by giving citizens rabbits to later reproduce and consume. The plan to implement urban farming backfired because the citizens saw the rabbits as pets and refused to consume them. The government then tried to recharacterize the rabbits on different media to encourage people to see them as meat, not pets.
While the country continues to face short supplies of food, water and power shortages, many Venezuelans increasingly blame Presidents Maduro and Chavez for the economic disaster. Their socialist campaigns were based on aiding the poor but in the process the economy has been decimated with high priced goods and a failed currency and those Venezuelans who can are fleeing the country.
Read more posts by Rebeca Zambrano