The inevitability of life has always been one that pushes people, or countries to plan for an unexpected rainy day. And history has always been witness to countries with rapid growth face their unexpected yet inevitable downfall: this is one such account. From being one of the wealthiest countries in Latin America and having the largest oil reserves known in the world, Venezuela is currently facing hyperinflation which has brought the country to the brink of collapse.
This probes the question of how a country with a rich democracy and economic wellbeing became the dictatorship with no economic security that it is today. As economists pointed out, the country’s downfall dawned when Hugo Chávez was elected president in the year 1998. Chávez’s reign lasted for 15 years, and can be divided into two phases on the basis of his policies. He began his presidency as a leader mainly focused on providing economic benefits to the underprivileged section. In an interview with the Al Jazeera, Eva Golinger, a former advisor to Hugo Chávez said “Chávez was seen very much as a man of the people,the poor people, and he identified with them and he loved them, and they loved him.”
During the first phase, Chávez had resources which could be exploited to a great extent in order to boost economic development. He once said “It is our option to give power to the people especially the poorest and the weakest, so that they can lift themselves up. It is our option to build a developed, modern, productive and diversified economic model to develop the country.” He sought Cuba’s help for the formulation of one of his famous social programmes, Misiones, which focused mainly on the eradication of poverty, reduced economic inequality and equitable distribution of the oil revenue. These new social programs focused on health-care, access to food, scholarships and provided people with citizenship rights, identity cards, access to job training, access to breakfast clubs, and university systems. The diversification of economic strategy was to reduce Venezuela’s vulnerability to oil prices by adopting land reforms and reducing import dependency. Professor Margarita Lopez Maya (Central University Of Venezuela) commented for Al Jaazera, “He (Chávez ) has power and he has money and so he decides new forms of social policies that can distribute the oil revenues in a more massive way towards those that need it more, towards the poor.”
The second phase of his rule started with the policies that once again focused on ideas of nationalism, expropriation of idle factories, moving away from market exchange and its unpredictable prices, changing ownership of the material and intellectual properties, and ensuring that the government was not guided by private interests. All of these resulted in a higher cost of production of oil as the number of people employed in the oil industry was increased, but failed to do so for the number of barrels produced, which remained the same and inevitably increased dependency on the country’s oil reserves. This continued for a while but did not cause much harm as each oil barrel which was previously sold for $7-$8 was now being sold for over $100 per barrel, and the returns covered for the national debt.
“What this is doing though is essentially still using oil as that redemptive quality to bring social change. While bringing social change,… deepening the dependence on oil…and he can do this while the oil prices are high.” -Professor Miguel Tinker Salas, (Author of Venezuela: What Everyone Needs to Know). Chávez’s government neither considered the cyclic nature of oil prices nor saved anything for future contingencies, and this negligence had an impact once the oil prices stumbled.
After Chávez’s death, the presidency was handed over to his personally chosen successor by Nicolás Maduro in 2013. His policies mainly focused on economy, crimes and army. The economic policies attempted to curb the inflation, and introduced the Petro, the state run crypto-currency which was launched earlier this year. According to Maduro, Petro will be worth $60. This further led to the currency devaluation to 95%-96%.
By 2017, the country’s hyperinflation rocketed and has been doubling steadily for the past nine months. The annual inflation for 2017 was predicted to be 80,000%, one of the highest in Latin American history. Economists have predicted that it will hike upto 3,00,000%- 4,00,000% in the years to come. Over the last four years, the GDP, of the country has fallen by over 35%, making it much worse than America’s economy during the Great Depression.
This instability in the economy has shaken the country, looting them of economic stability, food security, safe public spaces, and even forcing many to flee the country just to sustain themselves, away from a place where the streets are terrorized by thieves and the country’s leaders are actively avoiding the very existence of their crisis.
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