Crisis in Venezuela (Essay)

Venezuela, once considered one of the most prosperous countries in Latin America, experiences economic crisis today. This country with rich oil resources is on the verge of a humanitarian catastrophe. The biggest contradiction of the current situation is the fact that Venezuela could have been the richest country in the world due to its extensive deposits of oil that gives 95% of exports and 60% of budget revenues (Boyd & Pitts, 2014). However, the drop in world oil prices has shattered Venezuela’s economy. Thus, Venezuelans do not remember such a powerful economic crisis with a huge inflation and devaluation. Analysts attribute this economic catastrophe not only to the internal problems of the oil-dependent Venezuela but also to the collapse of world prices for oil. Because of the total deficit, prices for some foreign-made goods break records. Moreover, the current government and President Maduro continue to destroy the country’s economy very quickly.

The Essence of the Crisis in Venezuela

Venezuela, which continues to build socialism, experiences the worst economic and political crisis in its history. Despite the fact that the country is the fifth largest exporter of oil in the world, its people live in poverty and hunger (Bremmer, 2016). Venezuela lacks food, water, essential goods, and there are no medicines in hospitals. Moreover, numerous armed guards accompany the transportation of food. In this regard, the government has declared a state of emergency. These consequences are the result of the government to build socialism,  starting with President Hugo Chavez’s attempts to do so. However, like in any country where it was built, the result was a rather critical situation in the economy and political sphere.

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At least two factors can explain why the situation is so dire in Venezuela. The first reason is the criminal situation in the country. For example, in Venezuela, 27,000 people are killed violently every year (Bremmer, 2016). Moreover, criminals do it with cynicism and cruelty. For example, a boy walks down the street; he only has money for the cheapest pair of shoes, and not only do criminals take his money away and kill him, but they also shoot him 10 times. Here, if a person comes home alive and nothing has been stolen, or one has not been beaten or killed, they should be happy only because of this fact. Therefore, cruelty, mortality, and crime are enormous in Venezuela.

The second factor is the country’s weak economy and economic crisis that is determined by many factors. One of them is mismanagement that has led Venezuela to extreme poverty. Recently, many entrepreneurs’ private enterprises have been expropriated, which means they produce nothing (Bremmer, 2016). Consequently, from a country that produces a huge amount of rice, corn, coffee, and other products, Venezuela has turned into an importer of these commodities. As a result, the population lacks food, and many people do not even remember the taste of many products. Moreover, products are sold at very high speculative prices, and people have to stand in long queues in special stores to buy them. Often, people stand from two o’clock in the morning until five in the evening to buy two packages of flour and one package of sugar.

Furthermore, in order to find food, people have to go to neighboring countries. Thus, findings report that people are desperate and come to such a state that they punch turnstiles on the border with Colombia and run to the shops to buy at least some food for their children (Bremmer, 2016). The worst situation is with young children who cannot get any milk. It has become a common practice when mothers with children just knock on the door and ask for milk and bread. Admittedly, there are no abortions in Venezuela, and this is not only a ban on the level of legislation but the immorality of abortion is ingrained in their subconscious. They adore their children, and there are no orphanages in the country.

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Oftentimes, when parents cannot take care of their children, even the neighbors can do it. In fact, their love for children and family is a very important concept for them. Now, when many children are hungry, Venezuelans become very sad. Once, Venezuelans were named the happiest people in the world because their life was full of laughing and joking; they were so friendly that any person could communicate with them with great joy. However, now, they become sad because of the situation in the country.

The Features of Venezuela’s Economy

The Venezuelan economy is paradoxical and full of signs of a collapsing socialist way of life. Nowadays, the country is on the verge of a beginning hyperinflation, characterized by many-hour queues, cards, multiple currency courses, and a “black” market (Editorial Board, 2016). Thus, the fall in world oil prices multiplied by populist promises and the socialist rhetoric of the country’s leadership are to blame for such a situation. Therefore, the growth of economic problems has led to a political crisis. Admittedly, half a century ago, Venezuela was the world’s second largest oil producing country, and oil extraction began in the 1920s by large American companies (Editorial Board, 2016). The research asserts that oil gave 95% of exports and 60% of budget revenues (Boyd & Pitts, 2014). As a result, the country quickly became the leader among Latin American nations in terms of living standards.

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In 1976, foreign oil companies were nationalized because the government was not satisfied that they took profits from the suddenly increased oil prices (Boyd & Pitts, 2014). Consequently, oil production in the country fell and continued to fall for another decade. Moreover, it has not recovered up to the level of the early 1970s up to this day (Boyd & Pitts, 2014). Nevertheless, the proven reserves of oil in Venezuela are huge. Thus, if in 2005, the country was on the seventh place in the world, after the discovery of Orinoco oil shale deposit, it was on the first place in the world, with an indicator of 297 billion barrels, overtaking Russia almost threefold (Editorial Board, 2016). Paradoxically, with the almost four-fold increase in proven oil reserves in the last decade, oil production fell by almost 1.5 times (Editorial Board, 2016). Many studies reported that in 2008-2009, a short-term drop in oil prices immediately led to a balance of current accounts to zero and caused a two-year drop in GDP in 2009-2010 (Editorial Board, 2016). Therefore, since the country’s dependence on oil is very high, fluctuations in oil prices immediately affect the situation in the country.

Furthermore, the fall in oil prices has caused a recession in the economy that only accelerated in the coming years. Thus, for the current year, the IMF predicts an increase in recession to 8% and the continuation of the decline at a slower pace until 2019 (Editorial Board, 2016). However, the trouble occurred not only in the economic downturn. Admittedly, a hard currency deficit was formed because current accounts of the balance of payments sharply went down. In addition, during recent years, the bolivar was held at around six per dollar, but the black-market rate, according to some sources, differed from the official one by more than 100 times in the middle of 2015 (Editorial Board, 2016). As a result, the dollar became deficit because legally, a resident of the country had the right to buy not more than $3,000 a year at the official rate. An overvalued bolivar made imports very cheap and halted the domestic agricultural production. Moreover, currency deficit leads to the fact that the country cannot pay for printing its own banknotes because it has no money.

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The Range of Difficulties

In Venezuela, natural difficulties added to the economic ones. Thus, in 2016, a drought, connected with the El Niño climate phenomenon in the Pacific, dramatically lowered the level of rivers and electricity generation at the Guri hydroelectric power station, the producer of up to 2/3 of the country’s electricity (Lopez, 2016). Moreover, Venezuela, which exports energy resources and which has the world’s richest oil reserves, has remained without energy. President Maduro introduced a four-day working week for two months, making Friday a weekend, and then transferred civil servants for a two-day week. In addition, hotels and shops had to work for at least nine hours a day on their own generators, and heavy industry enterprises were obliged to cut energy consumption by 20% (Lopez, 2016). It was the evidence of collapsing socialism that was accompanied with cards, queues, deficits, multiple currency rates, and the black market.

Due to these conditions, a political confrontation in the country constantly grows. Since Maduro has not even provided information about the country’s economic situation to the parliament, the latter tries to intercept the administration of the country and use legal methods to remove him from power. In addition, foreign pressure on Venezuela is also on the rise today. Thus, the former US presidential candidate, Senator John McCain, publicly demanded former US President Barack Obama to send the army in Venezuela in order to protect the US interests and give freedom to Venezuelans (Lopez, 2016). In response, Maduro accused the USA of destabilizing the situation in the country and providing multimillion-dollar financing of opposition groups and non-profit organizations.

Furthermore, the crisis in the country grows against the background of the impoverishment of the population and the destruction of the socialist gains that have developed in recent years and decades such as low prices for food, gasoline, etc. Over time, the situation has become quite unstable. What is more dangerous, the President of Venezuela does not intend to abandon his power regardless of the economic difficulties in the country. Therefore, many experts consider that this situation can lead to a civil war that might bring even greater destruction than ever before (Gillespie, 2016). Unfortunately, the country continues to destroy its economy very quickly.


The opposition believes that the Nicholas Maduro bears a personal responsibility for the current situation. The Members of the Parliament have repeatedly stated the need to remove the President from power. Therefore, opposition leaders consider that the government, having blocked the possibility of holding a referendum on the resignation of the President, has committed a coup (Gillespie, 2016). Thus, in January 2017, the opposition majority in the country’s parliament voted for the resignation of President Nicolas Maduro (Gillespie, 2016). However, their appeals were not successful. Moreover, the Supreme Court of Venezuela has deprived the National Assembly of the country of its authority, in which the opposition prevails.

Conclusion

Venezuela experiences the worst economic crisis in its history. Being the fifth largest exporter of oil in the world, the country has been so deeply engulfed with economic and political difficulties that its people live in poverty and hunger. The fall in world oil prices has shattered Venezuela’s economy, and people lacks food, water, essential goods, while there are no medicines in hospitals. A very difficult criminological situation results in high  murder rates. Therefore, not only are people are hungry, but they are also unsafe in their homes. Once the happiest nation in the world, Venezuelans have become sad. Their living standards are extremely low, and people need help. In this concern, many people believe that the main cause of this crisis is the mismanagement of the current government and President Maduro as well as the fall in world oil prices. However, the country’s political orientation also contributes to the current crisis. Their attempt to build socialism has led them to a rather critical situation.

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